ESG Performance and Dividend Policy: Role of Board International Experience

Abstract

In this study, we focus on the effect of Environmental, Social, and Governance (ESG) performance on corporate dividend policy and the moderating influence of the board's international experience on this relationship. With increasing global attention to sustainability, ESG is no longer an optional consideration in corporate strategy-it is a key element that will either boost a company's reputation and competitive edge, or define efforts to demonstrate socially-aware corporate citizenship. Prior research has been divided in respects to the impact of ESG performance on financial firm performance especially with respect to dividend policy. This research particularly examines firms' in the context of ASEAN which reputedly has less robust corporate governance and investors protection as compared to developed countries. Study of ASEAN companies leads to the conclusion that better ESG packages is related to the less volatile dividend policies. Further, board members' international experience is also found to directly affect dividend policy adversely but does not reinforce the relationship between ESG performance and dividend policy. Our evidence also helps to provide new insight into the extent to which the ESG and board characteristics affect dividend policy and thereby serves as useful information for those interested in assessing corporate sustainability.