Abstract
This paper investigates the relationship between Environmental, Social, and Governance (ESG) practices and firms’ payout policy (PP). The sample analyzed 3207 European firms from 2018 to 2022. The investigation reveals a positive and significant effect of ESG practices on firm’s PP, suggesting that companies prioritizing sustainability distribute higher dividends to shareholders. The results remain robust across different model specifications. This study offers valuable contributions to both theoretical and practical domains, enhancing the understanding of how sustainable concerns influence companies’ strategic decisions and highlighting the possible trade-off that managers face between investing in sustainability initiatives and distributing dividends.
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