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Corporate social responsibility and the wealth gains from dividend increases
Author(s) -
Glegg Charmaine,
Harris Oneil,
Ngo Thanh
Publication year - 2018
Publication title -
review of financial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.347
H-Index - 41
eISSN - 1873-5924
pISSN - 1058-3300
DOI - 10.1016/j.rfe.2017.07.002
Subject(s) - corporate social responsibility , dividend , commit , shareholder , agency cost , monetary economics , agency (philosophy) , business , stock (firearms) , stock price , dividend payout ratio , dividend policy , argument (complex analysis) , social responsibility , economics , financial economics , corporate governance , finance , philosophy , database , ecology , chemistry , computer science , engineering , biology , paleontology , biochemistry , epistemology , series (stratigraphy) , mechanical engineering
This study examines whether corporate social responsibility ( CSR ) influences the stock price response to dividend increase announcements and changes in subsequent operating performance. We find that dividend increasing firms with lower CSR scores elicit higher abnormal announcement returns and greater improvements in industry‐adjusted operating performance. These findings support the argument in the literature that socially responsible firms are more transparent and commit to higher ethical standards than other firms, suggesting that they suffer fewer agency and informational problems (Kim, Park, & Wier, 2012). Consequently, larger dividend payouts reduce agency costs in firms with lower CSR commitments, thereby generating higher wealth gains for shareholders.