How does dividend payout affect corporate social responsibility? A channel analysis

We find that dividend paying firms exhibit better corporate social responsibility (CSR) performance in the following year than non-paying firms. We find that this relation can be explained by stakeholder relationship management through CSR, as dividend payout reflects the shareholder-stakeholder conflict. Specifically, for dividend payers, we find an increase in CSR performance after states adopt constituency statutes which encourage board’s attention on stakeholders, supporting a causal inference of the stakeholder relationship management’s effect on CSR. The relation is more pronounced when management is friendlier to CSR. Our paper provides a novel finding that the CSR-dividend relation is attributed to the management of the interests of stakeholders, in addition to a typical explanation by the financial capability of dividend payers