DOES GOOD STEWARDSHIP REDUCE AGENCY COSTS IN THE OIL AND GAS INDUSTRY? EVIDENCE FROM DIVIDEND POLICY

摘要

The four regressions help explain a large part of the variation in dividend yields. However, the only significant explanatory variables are ESG percentile Model 2 and CONT in Model 4 and in Model 5. ESG percentile was negatively related to dividend yield and in both cases CONT was positively related to dividend yield. The negative relationship between ESG percentile and dividend yield suggests that firms with higher (better) ESG percentile rankings pay either lower dividends or have increases in stock price. Either change will result in a lower dividend yield. This finding is consistent with investor behavior regarding firms and corporate governance issues. Firms that are better environmental or social stewards, or that have better corporate governance mechanisms in place, are rewarded by investors. Firms that do not exhibit good governance or good stewardship are penalized. The positive significant relationship between the controversy rating and dividend yield is also consistent with expectations. Firms with higher controversy levels will need to pay out higher dividends or stock price will fall. Either change, or both changes, will result in a higher dividend yield. The higher dividend payment forces the firm to the additional scrutiny of the external markets and provides additional information about how the controversy impacts the firm. Or, investors may opt to sell the stock, pushing price lower and dividend yield higher. Overall, the results provide additional evidence that firms consider several social and environmental factors when establishing dividend policy. As we would expect in the current investing climate, oil and gas firms are affected by environmental factors and controversy. Managers of these firms should focus some effort on the prevention of issues resulting in negative publicity and overcoming some of the negative stigma that can be associated with this industry.