Do Sustainable Firms Pay Better Dividends? International Evidence on ESG and Payout Policy

Abstract

This study investigates how environmental, social, and governance (ESG) performance shapes corporate dividend policy using an international panel of 3665 publicly listed enterprises from 14 countries in the Americas, Europe, and Asia from 2010 to 2022, spanning six sectors: finance, industry, technology, healthcare, basic materials, and utilities. We document an apparent size-based asymmetry: ESG has little effect in small firms, but it is associated with higher dividend per share and more stable payout ratios among medium and large firms, with dividend growth improving mainly for large firms. Sectoral evidence shows that ESG-related dividend benefits are most substantial in financial and technology firms. Importantly, disaggregating ESG reveals that the overall effect is driven primarily by the governance pillar, while environmental performance shows weaker, and sometimes costly, links to payout outcomes, especially for smaller firms. These results contribute new cross-country, multi-sector evidence that ESG mainly operates as a governance-driven dividend-stability mechanism, implying governance catch-up rather than a uniform sustainability–payout channel.