Oil Price Volatility vs. Sustainable Investment: Impact on Global Dividends

Sustainability has become a central concern for businesses and investors worldwide, yet obstacles arise when investors' perceptions change, and regulatory policies hinder businesses from committing to Environmental, Social, and Governance (ESG). This study examines the impact of (ESG) performance on dividend policy across six major sectors—Financial, Industrial, Technology, Healthcare, Basic Materials, and Utilities—in fourteen countries across the Americas, Europe, and Asia (USA, Canada, Brazil, Mexico, Chile, Turkey, India, Japan, China, UK, Germany, Italy, France, and South Korea) from 2010 to 2022. We explore the relationship between ESG scores and dividend policy utilizing a comprehensive dataset from publicly traded companies. We focus on three key dividend measures: dividend per share, dividend payout ratio, and dividend growth. We assess the differential impact of overall ESG performance and individual ESG pillars (Environmental, Social, and Governance) on firms of varying sizes, small, medium, and large—within each sector. Robust econometric techniques such as Two-Stage Least Squares (2SLS), Generalized Method of Moments (GMM), and Difference-in-Differences (DID) models are employed to address potential endogeneity issues and validate findings during the economic shock of COVID-19. Our results consistently show that ESG performance positively influences dividend policies; however, the effects vary by sector and firm size. Generally, medium and large firms benefit the most. This study offers detailed information about how the ESG score affects dividend policy across diverse sectors globally. It provides insightful analyses for managers, investors, and legislators who want to comprehend how sustainable investments affect business financial choices.