Financial performance and dividend payout policies of socially responsible firms in greater China

Abstract

Using Environmental, Social and Governance (ESG) data, this paper shows surprising results for corporate governance in Mainland China, Taiwan and Hong Kong. This paper is the first of its kind to focus on the relationship between corruption and dividend payout policy in Chi-na, which is not widely researched in the academic. It shows contrary results to existing re-search on the relationship between corruption and dividend payout policy. It is also one of very few studies to cover both environmental and corruption issues in the three major coun-tries and regions in Greater China In contrary to the literature, the following points have been discovered through studying ESG data. First, contrary to western examples, Chinese firms with fewer corruption problems have lower Return of Equity (“ROE”) and lower dividend payout ratio. Second, based on our empirical data, the relationship between environmental performance and ROE for Chinese firms is not statistically significant. Third, unlike American firms, we find that Chinese firms do not make use of dividend payout policy as a potential control mechanism for moral hazards.