Corporate social responsibility and dividend payout policy in extraordinary time: Empirical study of South Africa

Corporate social responsibility (CSR) is a strategic tool that firms use to gain competitive advantage and enhance profitability in the long run, yet its effect on dividend payout in extraordinary times is limited. Grounded in stakeholder and dual responsibility theories, this study examines the effect of CSR on the relationship between COVID-19 and dividend payout. Data from the period 2015–2021 were obtained from 114 non-financial listed firms on the Johannesburg Stock Exchange, South Africa, and analyzed by multivariate and logit regression techniques. COVID-19 has a negative effect on the amount and likelihood of dividend payment, while CSR performance has a positive effect on the likelihood and amount of dividend payment. However, the result of the negative effect of COVID-19 on dividend payment does not differ between high and low CSR performing firms. Conversely, the impact of COVID-19 and CSR on dividend payment differ between high and low financial constraint firms. Shareholders should learn to manage their expectations of dividends payment during times of crisis like COVID-19, as firms tend to focus more on addressing the needs of stakeholders through CSR initiatives, which will enhance profit in the long term, rather than paying out dividend to shareholders.