School of Economics and Finance Faculty Publications

CSR and Firm Value following Dividend Cuts: International Evidence

Document Type

Article

Publication Date

9-1-2026

Abstract

This study examines the relationship between Corporate Social Responsibility (CSR) and market reactions to dividend omission and reduction announcements across 34 countries. We find a significant negative relationship between CSR scores and cumulative abnormal returns following such announcements. Contrary to the insurance hypothesis, high-CSR firms experience more severe market penalties when dividend commitments are reduced. We argue that dividend cuts act as salient signals that trigger investor reassessment of prior CSR engagement. When firms with strong stakeholder-oriented reputations reduce payouts, investors may perceive a violation of expectations regarding financial stability and capital allocation discipline. The negative effect is more pronounced in countries with weaker shareholder protection and civil law systems, and for firms with higher free cash flow problems, greater information asymmetry, and tighter financial constraints. These cross-sectional patterns are consistent with amplification mechanisms rooted in belief updating, agency concerns related to managerial discretion over free cash flow, and perceived shareholder–stakeholder tradeoffs. Our results are robust after addressing endogeneity using instrumental variable (IV) approaches and Oster’s omitted variable diagnostic test, and selection bias using propensity score matching (PSM) and entropy balancing (EB) techniques.

Publication Title

Journal of International Financial Markets Institutions and Money

DOI

https://doi.org/10.1016/j.intfin.2026.102369

Link to Full Text

Share

COinS