Opportunity costs and the value of corporate social responsibility: evidence from firm dividend policy

ABSTRACT

Theories of CSR value under a real-option framework suggest that the payment of dividends serves as an opportunity cost. One of the resulting predictions is that the value of CSR spending is lower for dividend paying firms. We examine this prediction empirically. While we find that CSR is positively related to firm value for both dividend payers and non-payers, CSR is roughly 50% less valuable to dividend payers than non-dividend payers.

KEYWORDS:

• Dividend policy
• corporate social responsibility
• real options

JEL CLASSIFICATION:

• D81; G13
• G31
• M14
• K42

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

¹ In Appendix B we find that our results hold when controlling for endogeneity. In unreported results, we find that our conclusions hold when examining the full sample and using a dummy and interaction variable approach to testing.