Investigating the link between ESG activities and dividend policies

Abstract

This study investigates the relationship between environmental, social, and governance (ESG) activities and dividend policies among non-financial firms. Specifically, it explores how ESG performance influences dividend payout levels, stability, and the likelihood of dividend payments. Using a broad sample of Korean non-financial firms listed on the KOSPI market, we employ multiple regression models and a logit analysis. Our findings reveal three main results. First, high ESG firms tend to pay more dividends than low ESG firms. Second, high ESG firms are more likely to pay dividends than low ESG firms. Third, among the ESG dimensions, environmental (E) and social (S) factors significantly contribute to dividend policies, whereas governance (G) factors have no consistent impact. Overall, these results suggest that ESG activities positively affect Korean firms’ dividend policies, with environmental and social factors playing particularly important roles.