{"title":"Do firms adjust their payout policy to public perception of their social irresponsibility?","authors":"","doi":"10.1016/j.jbusres.2024.114941","DOIUrl":null,"url":null,"abstract":"<div><p>Perception of social irresponsibility from negative media coverage may affect a firm’s payout in two opposite ways. Firms may lower dividends in anticipation of greater financial constraints or pay higher dividends to signal that potential damage to their reputation and future cash flows is expected to be limited. Using data from RepRisk for a sample of US firms, we find compelling evidence supporting the second outcome, i.e., firms perceived as socially irresponsible pay higher dividends. This result remains valid for different payout measures and after controlling for endogeneity using instrumental variables, entropy balancing, and a difference-in-differences approach. Furthermore, the relationship is stronger for high-growth firms, consistent with their greater needs for external finance. The signaling motive is further supported by the stronger valuation effect of dividends for firms perceived as socially irresponsible, as well as the subsequent decrease in the perception of their irresponsibility and higher sales growth. Overall, the results suggest that firms use dividend policy to mitigate the potential damage due to the perception of their social irresponsibility.</p></div>","PeriodicalId":15123,"journal":{"name":"Journal of Business Research","volume":null,"pages":null},"PeriodicalIF":10.5000,"publicationDate":"2024-09-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://www.sciencedirect.com/science/article/pii/S0148296324004454/pdfft?md5=a877deaa5963c60b5188f7067a7a7890&pid=1-s2.0-S0148296324004454-main.pdf","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Business Research","FirstCategoryId":"91","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S0148296324004454","RegionNum":1,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS","Score":null,"Total":0}
引用次数: 0
Abstract
Perception of social irresponsibility from negative media coverage may affect a firm’s payout in two opposite ways. Firms may lower dividends in anticipation of greater financial constraints or pay higher dividends to signal that potential damage to their reputation and future cash flows is expected to be limited. Using data from RepRisk for a sample of US firms, we find compelling evidence supporting the second outcome, i.e., firms perceived as socially irresponsible pay higher dividends. This result remains valid for different payout measures and after controlling for endogeneity using instrumental variables, entropy balancing, and a difference-in-differences approach. Furthermore, the relationship is stronger for high-growth firms, consistent with their greater needs for external finance. The signaling motive is further supported by the stronger valuation effect of dividends for firms perceived as socially irresponsible, as well as the subsequent decrease in the perception of their irresponsibility and higher sales growth. Overall, the results suggest that firms use dividend policy to mitigate the potential damage due to the perception of their social irresponsibility.
期刊介绍:
The Journal of Business Research aims to publish research that is rigorous, relevant, and potentially impactful. It examines a wide variety of business decision contexts, processes, and activities, developing insights that are meaningful for theory, practice, and/or society at large. The research is intended to generate meaningful debates in academia and practice, that are thought provoking and have the potential to make a difference to conceptual thinking and/or practice. The Journal is published for a broad range of stakeholders, including scholars, researchers, executives, and policy makers. It aids the application of its research to practical situations and theoretical findings to the reality of the business world as well as to society. The Journal is abstracted and indexed in several databases, including Social Sciences Citation Index, ANBAR, Current Contents, Management Contents, Management Literature in Brief, PsycINFO, Information Service, RePEc, Academic Journal Guide, ABI/Inform, INSPEC, etc.