Corporate Social Responsibility, Pension Liability, and Dividend Policy

In recent years, firms had been paying increasing attention to its social performance to improve the overall corporate reputation. Another clear trend is that firms are shifting away from defined benefit pension plans (DB plans) which means firms will be bearing less risk and liability, this can be a significant change to household retirement savings and more directly, retiree well being. Moreover, the portion of dividend-paying firms is dropping over the years. This paper studies the relationship between Corporate social responsibility, corporate pension liability, and dividend payout ratio using annual pension data and dividend data from Compustats and Corporate Social Responsibility data from MSCI ESG KLD (formerly KLD and GMI); Firm profitability was also taken into account with annual fundamental data from Compustats.