TITLE:
ESG and Dividend Payout under the Consideration of Agency Cost
AUTHORS:
Lie-Huey Wang
KEYWORDS:
Environmental, Social, and Governance (ESG), Dividend Payout, Agency Cost, Asset Efficiency, Institutional Ownership, CEO-Duality
JOURNAL NAME:
Journal of Mathematical Finance,
Vol.15 No.2,
May
23,
2025
ABSTRACT: This study examines 1495 publicly listed companies over the period 2016-2022 to assess whether higher ESG (environmental, social, and governance) scores are associated with greater cash dividend payouts, and to explore how this relationship varies under both performance-driven and governance-driven agency cost scenarios. The results reveal that firms with higher ESG scores are associated with greater dividend payouts. Among the three pillars, the social and governance scores exert a stronger influence on dividend payout than the environmental score. The positive ESG-dividend relationship is most pronounced in firms facing greater agency costs, including young, low asset efficiency, and low free cash flow firms. The social score has a particularly strong effect in firms with non-dual leadership structures or low institutional ownership. The environmental score is most influential in firms with high institutional ownership, reflecting institutional investors’ sensitivity to environmental performance.