Impact of Dividends, Corporate Social Responsibility, and Ownership on Firm Value – Evidence from India

DOI: 10.5176/2251-1997_AF16.60

Authors: Rama Seth and Sakthi Mahenthiran

Abstract:

We study 115 Indian listed companies (ILCs) over the period 2009-2012. Using agency theory, dividend signaling theory, and stakeholder theory of CSR reporting the study examines whether signaling using environmental and social governance disclosure (ESG) compliments dividend signaling by ILCs. We argue that the dividend payouts and ESG disclosures are complementary, that can help signal the optimality of investments in dividends and CSR activities. Results find support for three hypotheses which state that the dividend payouts of ILCs are positively and significantly associated with firm values, the dividend payouts interact with ESG disclosures to positively and significantly impact firm values, and the channel that causes the complementarity of dividend signaling and signaling via voluntary disclosures about the investment in CSR activities is the high level of interest of institutional investors on the signaling properties of dividend payouts and voluntary disclosures.

Keywords: Dividends, Corporate Social Responsibility, Firm Value, India