Reactions to Reputational Exposure on Corporate Dividend Policies : Evidence from Media Around the World

Using a large sample of firms from 69 countries, we find that reputational risk induced by adverse ESG exposure through media channels is associated with greater corporate dividends payout ratios. This result is robust to endogeneity concerns and alternative measures of key variables. The results of the channel analyses suggest that a greater level of free cash flow problems, greater agency costs, and greater CSR performance play a significant role in the association between reputational risk and dividend policies. We also find that the positive association between reputational risk and dividends payout ratios is stronger in countries with weak rule of law, weak shareholder/creditor protection and weak public enforcement. Overall, our analysis indicates in a worldwide setting the importance of reputation resulting from media coverage of corporate social irresponsibility conducts in influencing dividends policies