Corporate Sustainable Management, Dividend Policy and Chaebol

Abstract

This study empirically examines the relationship between corporate sustainable management (CSM) and dividend policy. Among the various motivations related to dividends, this study examines the relationship between CSM and dividend policy based on the agency and signaling theory. After examining the relationship between CSM and dividend policy, we investigate whether belonging to a large business group (chaebol group) has a significant effect on the relationship between CSM and dividend policy. The analysis period is from 2011 to 2018, and the ESG ratings of the Korea Corporate Governance Service are used as proxies for CSM. The empirical results show that CSM and dividends have a significant relationship in the positive direction. This means that firms with excellent CSM activities have higher dividend levels than those that do not. Furthermore, the association between CSM and dividends is more negative for firms belonging to a chaebol group. This indicates that the positive relationship between CSM and dividends in a firm that belongs to a chaebol group is weakened. This means that the relationship between CSM and dividends in the group belonging to the chaebol group is weakened. It belongs to the group of conglomerates, meaning that the relationship between the amount of dividends and CSM weakened. Our study focuses on CSM as a determinant of dividends, and examines the effects of belonging to a chaebol group in the relationship between CSM and dividends. Given that resolving the interest incompatibility between investors and managers is the focus of corporate governance, dividend policies can be used as a method for resolving the interest incompatibility between investors and managers.

Moderating role of corporate governance and ownership structure on the relationship of corporate sustainability performance and dividend policy

“…The second theory that is closely associated with the relationship between CSP and dividend policy is signaling theory (Bhattacharya 1979). According to this theory, companies use dividend payments to give a positive signal to the market about the expected results of the company (Benartzi, Michaely, and Thaler 1997;Miller and Rock 1985;Oh and Park 2021). Using 115 Indian listed companies over the period of -2012, Seth and Mahenthiran (2022 find that signaling via corporate social responsibility (CSR) and dividends are complementary means of managing stakeholder relations.…”

“…In emerging markets with a distinct ownership structure and corporate governance measures, few studies have explored the relationship between CSP and dividend policy and most of them support a positive relationship between CSP and dividend policy (Oh and Park 2021;Saeed and Zamir 2021;Sheikh et al 2021;Trihermanto and Nainggolan 2020). In a recent study, using panel data from 320 listed firms from the top 10 emerging countries for the years 2015-2019, Lucas (2020) confirmed that there is a positive impact of sustainability on dividends, indicating that all the interests of stakeholders and shareholders can be aligned.…”

“…The interaction of corporate sustainability performance (CSP) and finance has received immense attention from academia, business community and financial industry due to the increasing influence of social and environmental challenges on organizations. Companies consider CSP a new strategic choice to improve reputation and gain more competitive advantage since CSP ultimately focuses on long-term corporate value rather than simply maximizing short-term earnings (Oh and Park 2021). Hence, companies position themselves to balance the association of CSP and firm value by aligning environmental, social and governance (ESG) goals within the strategic decisions (Dahlsrud 2008;Montiel 2008).…”

“…Dividend policy is one of them. It is an important way for investors to generate return on investment, and thus, it can be viewed as a socially responsible attitude toward the distribution of wealth (Oh and Park 2021). Companies use dividend policy to distribute a certain amount of net profit to the shareholders.…”

Corporate Social Responsibility and Dividend Policy in Indonesia : Advent of Firm Size as a Moderator

“…Dividend decision-making is not mandatory, but it remains a basic and traditional way for investors to generate a return on investment. Therefore, dividend policy can be a social responsibility attitude towards investors (Oh & Park, 2021). The size of the company as a strong determinant of the company's dividend payment decision because larger companies often have easier and better access, so they can raise funds faster to increase their social responsibility activities in the hope of encouraging a positive image and company reputation so that it can make it easier for companies to enter the capital market and will attract many investors (Abu Siam et al, 2021).…”