ESG Practices and Corporate Dividend Decision: A Moderated Mediating Analysis

Abstract

The study examines the direct and indirect roles of CEO efficiency and firm reputation respectively, in order to investigate the relationship between ESG practices and corporate dividend decisions of the Indian companies. The data is collected from NSE Nifty 500 and S&P BSE 500 index of the Indian listed firms during the period 2013 to 2022. The study also aims in addressing the drawbacks of the previous literature who assumes the direct relationships of the ESG disclosure on corporate dividend decisions which are inconclusive. Using the fixed effect model and structural equation model, the study demonstrates favourable and substantial correlations between ESG practices and dividend decisions that are conveyed through the corporate reputation. Further, through the application of the Instrument Variable Two Stage Least Square (2SLS IV) regression approach, CEO’s efficiency amplifies the insignificant impact of ESG disclosure on the company’s reputation. The results report that company reputation is a matter of stakeholders’ perceptions and reputation is distinct from the actual character and behaviour of the companies with the longitudinal data. The outcome of the study offers insights into how lack of consideration of factors results in inconsistent findings as reported in the previous literature.

Keywords: ESG Practices, Dividend Policy, Instrument Variable Two Stage Least Square (2SLS IV) Regression, Firm Reputation, CEO Efficiency

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