Revisiting the Governance-Dividend Nexus: The Mediating Role of Corporate Social Responsibility.

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[Version 3] doi: 10.12688/f1000research.167892.3 Other versions PMC13062773.1; 2025 Sep 9 PMC13062773.2; 2025 Dec 8 PMC13062773.3; 2026 Mar 31 Search in PMC Search in PubMed View in NLM Catalog Add to search Revisiting the Governance–Dividend Nexus: The Mediating Role of Corporate Social Responsibility Riffat Shaheen Riffat Shaheen 1 FAST School of Management, National University of Computer and Emerging Sciences, Islamabad, Pakistan Conceptualization, Data Curation, Methodology, Writing – Original Draft Preparation Find articles by Riffat Shaheen 1 , Hussaini Bala Hussaini Bala 2 Accounting Department, Tishk International University, Erbil, Iraq Formal Analysis, Software Find articles by Hussaini Bala 2 , Ahmad Haruna Abubakar Ahmad Haruna Abubakar 3 Management and Science University Faculty of Business Management and Professional Studies, Shah Alam, Selangor, Malaysia Funding Acquisition, Investigation, Resources Find articles by Ahmad Haruna Abubakar 3, a , Supriya Lamba Sahdev Supriya Lamba Sahdev 4 Alliance School of Business, Alliance University, Bengaluru, Karnataka, India Writing – Review & Editing Find articles by Supriya Lamba Sahdev 4 , Armaya'u Alhaji Sani Armaya'u Alhaji Sani 2 Accounting Department, Tishk International University, Erbil, Iraq 5 Department of Accounting, College of Economics, Management and Information Systems, University of Nizwa, Nizwa, Oman Validation, Writing – Review & Editing Find articles by Armaya'u Alhaji Sani 2, 5 , Ghousia Khatoon Ghousia Khatoon 2 Accounting Department, Tishk International University, Erbil, Iraq Conceptualization, Writing – Review & Editing Find articles by Ghousia Khatoon 2 , Umair Zahid Umair Zahid 6 Department of Business Management, Global Banking School, University of Suffolk, London, England, UK Writing – Review & Editing Find articles by Umair Zahid 6 Author information Article notes Copyright and License information 1 FAST School of Management, National University of Computer and Emerging Sciences, Islamabad, Pakistan 2 Accounting Department, Tishk International University, Erbil, Iraq 3 Management and Science University Faculty of Business Management and Professional Studies, Shah Alam, Selangor, Malaysia 4 Alliance School of Business, Alliance University, Bengaluru, Karnataka, India 5 Department of Accounting, College of Economics, Management and Information Systems, University of Nizwa, Nizwa, Oman 6 Department of Business Management, Global Banking School, University of Suffolk, London, England, UK a Email: [email protected] No competing interests were disclosed. Roles Riffat Shaheen : Conceptualization, Data Curation, Methodology, Writing – Original Draft Preparation Hussaini Bala : Formal Analysis, Software Ahmad Haruna Abubakar : Funding Acquisition, Investigation, Resources Supriya Lamba Sahdev : Writing – Review & Editing Armaya'u Alhaji Sani : Validation, Writing – Review & Editing Ghousia Khatoon : Conceptualization, Writing – Review & Editing Umair Zahid : Writing – Review & Editing Accepted 2026 Mar 19; Collection date 2025. Copyright: © 2026 Shaheen R et al. This is an open access article distributed under the terms of the Creative Commons Attribution Licence, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. PMC Copyright notice PMCID: PMC13062773  PMID: 41969287 Version Changes Revised. Amendments from Version 2 Revised amendments from version 2 The second revised version of this manuscript presents a number of improvements and clarifications compared to the original version of the article that was previously published. These changes were made in line with the reviewer’s comments and recommendations. First and foremost, there have been a series of improvements to the discussion and conclusion sections to ensure that the interpretations made are closely related to the empirical findings and to differentiate between the patterns identified and their possible implications from an ethical and sustainable perspective. There have also been a series of minor improvements to the methodology and robustness sections to further clarify the approach used to estimate the results. In addition, the discussion section has been further refined to avoid any degree of speculation and to increase the level of analysis used in the text. Finally, a minor review of the text from a stylistic and linguistic perspective was carried out to further improve the ease of reading and comprehension while maintaining the original analysis and findings. Abstract Background Despite plentiful research on the link between corporate governance (CG) and dividend policy, the mediating impact of corporate social responsibility (CSR) on the CG –dividend policy link remains unexplored. This study investigates the mediating impact of CSR on the CG –dividend policy link, and explores the mechanism through which CSR mediates this relationship. Methods Firms listed on the Shanghai and Shenzhen stock exchanges are considered as a study sample. The data collection period ranged from 2012 to 2021. The final sample included 15,800 firm-year observations. Results The results findings indicate that firms with strong CG tend to pay low dividends, consistent with the substitution hypothesis, in which dividends and CG act as substitutes for each other. In addition to establishing a direct link between CG and dividend policy, our study significantly contributes to the extant literature by presenting both theoretical proposition and empirical evidence on the mediation effect of CSR in the above-mentioned relationship. We find that CSR mediates the corporate governance- dividend policy relationship, which implies that in comparison to corporate governance, CSR has a more dominating impact on firms’ dividend policy decisions, and better-governed firms are more likely to engage in CSR activities to protect their stakeholders; consequently, they prefer to hold or invest cash instead of paying dividends because CSR engagements lower the cost of equity capital. These findings were corroborated by a set of robustness tests. Conclusions Our results have several implications for firms, regulators, and investors. Firms can use high dividend payouts to compensate for poor investor protection and to maintain good relationships with investors. When making investment decisions, investors are advised to consider socially responsible firms because of their strong CG structure. Finally, policy makers should give special consideration to CSR in order to reduce environmental and social problems and to enhance the related standards to ensure the safety and security of all stakeholders and hence reduce global accusation and pressure. Keywords: Corporate governance, Corporate social responsibility, Dividend policy, China 1. Introduction It is widely acknowledged that in recent years, different corporate scandals (e.g., WorldCom, Parmalat, Xerox, and Enron) and financial crisis outbreaks are likely to be caused by bad management practices. This situation highlights the significance of corporate governance (CG) practices; hence, CG has become a central concern in various discussions in the literature. Generally, CG provides several advantages to firms (e.g., reduced capital cost, strong corporate reputation, and improved performance) and stakeholders, including investors (e.g., legal protection and increased shareholder worth) and society (e.g., protection against corruption and an appropriate environment for investment), to enhance firms’ efficiency and competition and to facilitate capital market development. 1 , 2 However, compared with developed economies, firms and investors in emerging economies are less likely to enjoy these benefits because of poor CG and low investor protection. The central concern of CG is ensuring that investors receive fair investment returns, whether in the form of dividends or capital gains. However, in situations where governance is inadequate, investors may be threatened with expropriation by management or controlling shareholders if free cash flows are misused. 3 , 4 Because of expropriation concerns, investors are likely to choose dividends above capital gains. Corporate governance (CG) is an important factor in dividend policy 5 , 6 and dividend payout decisions are regarded as essential components of company policy. Finance researchers find dividend policy one of the most fascinating and contentious research topics because of its enigmatic character and significance in a company’s CG. The dividend policy and CG link have been studied in both developed and emerging economies; however, earlier researchers mostly focused on this link in the context of developed economies. 7 Since emerging countries’ financial markets are found to have a substantial influence on global financial activity and are receiving a large portion of world equity investments, investors have begun to take more interest in emerging markets’ dividend policy choices. Our investigation of dividend policy and CG links is based on China’s world’s largest emerging economy. The rising interest of investors in dividend payouts of Chinese listed firms is due to several unique features of the country. For example, China enjoys the position of the largest emerging economy in the world and the second largest economy overall. In publicly quoted Chinese corporations, dividend policy is the core financial decision 8 because dividend payments generated approximately half of the MSCI China Index’s total returns from 1999 to 2012 [ 1 ]. Further, in contrast to developed economies, investors in China are more dependent on dividends to obtain additional information because stock repurchases are strictly constrained by Chinese company law, and firms are hardly allowed to repurchase their stocks. 9 Finally, due to poor investor protection and poor law implementation, Chinese firms experience large variations in dividend policies compared with their Western counterparts 10 – 12 who enjoy stable dividends. Despite being the fastest growing economy, Chinese firms are found to have severe agency problems because most of them are owned by the Chinese government, which results in high agency costs. 13 Moreover, shareholder protection rights and governance practices in emerging economies such as China are not strong enough to protect minority shareholder rights. CG and corporate social responsibility (CSR) are regarded as two sides of the same coin. The focus of both CG and CSR is on ethical practices in an organization, and they help firms respond effectively to their stakeholders and the environment in which they operate. 14 Further, dividend policy is an important tool firms can use to reduce conflicts of interest and satisfy their shareholders. 7 , 15 – 17 Consequently, it is expected that better CG and CSR involvement can help firms protect their shareholders from expropriation threats through dividend payments, because dividends can be used to provide more benefits to investors and hence protect them against expropriation. 6 , 18 Given China’s impressive growth over the past couple of decades, the CSR of Chinese firms has received much attention from researchers. In contrast to developed countries where CSR is used as a means to show the company as a legal social entity to its stakeholders, Chinese firms consider CSR as a business tactic for gaining and maintaining market share. 19 , 20 In addition, these firms are involved in CSR activities to enhance their image, consequently improving shareholders’ financial performance and wealth of shareholders. 21 China’s rapid growth has caused severe damage to the environment and society. Examples include violation of food safety laws, heavy use of chemical fertilizers, excessive use, and endorsement of harmful drugs. Recently, China has made rapid assessments of CSR 22 and introduced several CSR reforms; however, Chinese firms’ CSR practices are still in an early stage, and firms are under greater pressure to be involved in CSR-related activities. 23 Despite plentiful research on the link between corporate governance (CG) and dividend policy, the mediating impact of CSR on the CG–dividend policy link remains unexplored. Considering the importance of dividend policy, corporate governance, and CSR performance in the capital markets of China, the central focus of this study is to explore the mechanism through which a firm’s CG influences its dividend policy in the presence of CSR, which is the main contribution of this study. Many researchers have attempted to study the link between CG and dividend policy. However, to the best of our knowledge, previous literature lacks the consideration of three variables together, and none of the studies have investigated this link from the perspective of firms’ engagement in CSR activities. The distinctive aspect of our research is that we explore the CG – dividend policy causal link from the perspective of the mediating role of firms’ CSR performance to identify whether a firm’s engagement in CSR activities influences this causal relation, and compared to corporate governance, CSR has a more dominant impact on dividend policy. Therefore, our study provides pioneering evidence on the mediating role of CSR in the impact of CG on dividend policies and is expected to make a significant contribution to the existing literature. Moreover, findings on the link between CG and dividend policies are mixed in nature. Our study contributes to the literature on CG - dividend policy links, supporting the substitution hypothesis. In addition, most previous studies in China have investigated the individual impacts of different CG mechanisms on dividend policy. By contrast, we used a comprehensive CG index covering the most important aspects, including BODs, disclosure and transparency, audit committees, remuneration committees, and shareholder rights. The study also makes a number of contributions to the literature. First, it builds on the body of knowledge that has been created to date regarding corporate governance and dividend policy, and introduces CSR as a mediator that ties these two constructs together. There is a substantial body of literature that examines each of these relationships individually, but less emphasis has been placed on how these relationships interact and how governance impacts dividend policy through CSR engagement. Secondly, it adds to the growing body of literature that examines sustainability governance and how it impacts corporate financial policy through engagement in socially responsible investments. It also ties in agency theory and other stakeholder-oriented approaches to governance to provide a more complete picture of how sustainability and shareholder concerns can be balanced. Finally, it adds to the literature through its focus on an emerging market context, which may have a different set of institutional and regulatory factors that influence governance than is seen in a more developed market. This adds to the body of literature that is beginning to explore how sustainability-oriented governance practices evolve in different economic contexts. Our dataset consisted of 15,799 firm-year observations from 2012 to 2021. Using Baron and Kenny’s (1986) mediation approach, we find evidence in favor of our main hypothesis that CSR mediates the causal relationship between corporate and dividend policy. The findings support our second argument about the mediating role of CSR: better CG leads to high CSR involvement, which in turn reduces dividend payments because of a firm’s preference to hoard or invest cash instead of paying dividends. Our first argument, that better CG can result in high CSR involvement, which in turn leads to high dividend payments through increased reputation and earnings of the firm, is not supported by the results. The remainder of this paper is organized as follows. Section 2 reviews the existing literature and develops the hypotheses. Section 3 explains the sample selection criteria, data sources, variables, measurements, and methodology used. Section 4 presents and discusses the empirical analysis results. Section 5 concludes the paper and Section 6 provides the implications of the study. 2. Review of Literature and Hypothesis Development 2.1 Corporate Governance and Dividend Policy Apart from other corporate decisions, shareholders are primarily concerned with dividend policy decisions, which are a central concern in firms’ financial decisions of the firms. 24 It is evident from the existing literature that, in firms’ corporate governance, dividend policy has received greater importance as an influential key 25 and in Chinese initial public offerings (IPOs), CG is an important determinant of dividend policy. 26 , 27 From the agency theory perspective, in firms with higher ownership concentration, minority shareholders are expected to be at expropriation risk when large shareholders, by using their voting rights, tend to affect the firm’s policies and decision-making for their private benefits. The threats of expropriation are more common in environments (e.g., emerging economies) with weak CG and low investor protection according to Ref. 3 . Moreover, large shareholders prefer to generate their own benefits when they gain full control of the firm and do not share these benefits with minority shareholders. 28 In East Asian and European economies, prominent agency problems arise due to minority shareholders’ expropriation by controlling shareholders. 29 The dividend policy is significantly determined by agency costs and can be used to limit minority shareholders’ expropriations by reducing corporate wealth under insiders’ control. 30 , 31 The ultimate goal of CG is to ensure that investors who supply finances to firms receive their investment returns is the ultimate goal of CG. 28 Shareholders receive return on investment either in the form of capital gain or dividends however, they prefer dividends to overcome the expropriation fear from controlling shareholders, as reported by Ref. 32 that, “dividends (a bird in hand) are better than retained earnings (a bird in the bush) because the latter might never materialize as future dividends.” Our discussion of the link between CG and dividend policy is based on the two most widely used agency models of dividends proposed by Ref. 32 . The first model known as “the outcome model” of agency theory suggests that to restrict managers’ private benefits of free cash flows, firms with strong CG tend to pay higher dividends. In other words, shareholders have the power to influence dividend policies when they have greater rights through strong CG or legal protection. 10 Hence, better governance helps firms reduce agency conflicts through higher dividends, meet shareholder demands, and enhance their trust in management, and consequently, the firm. The outcome model predicts a positive association between dividend policies and CG quality. Many studies have supported this model. For example, using a sample of Canadian firms, Ref. 33 showed that dividend yield is positively associated with board composition and governance quality. Reference 34 report that in the case of US and Indian companies, dividend payouts are positively associated with governance quality. They analyzed the interrelation between shareholder protection at both firm and country levels. Reference 35 claims high payouts in strong CG firms for a sample based on emerging markets. Based on survey data from listed firms in Korea, a positive association is found between good CG and dividend payouts. 36 Reference 32 find support for the outcome model by using a sample of 33 countries and report that in countries with strong investor protection, firms have a higher dividend payout ratio than countries with poor investor protection. Dividend payouts are higher and more consistent in firms where CG is stronger. 25 , 37 Reference 38 assert that firms with stronger shareholder rights pay more dividends because dividend policy is expected to be the outcome of the governance regime. Reference 39 found a positive association between dividend payouts and strong shareholders in Dutch firms. In countries with stronger creditors’ rights, firms tend to have higher payouts 40 supporting the outcome model. Recently, Ref. 41 studied the influence of family engagement and CG on dividend policies. They explore non-financial companies in Morocco and reveal that GC mechanisms have a strong influence on divided policy in Morocco. Conversely, the substitution hypothesis of agency theory proposes that, to have capital market excess and maintain good shareholder relations, higher dividend payouts can be used as a substitute for weak governance. 42 , 43 In firms with weak shareholder rights, building reputation by establishing good relationships with investors is a key concern, and dividend payouts play a vital role in building this reputation. By contrast, reputation and dividend payouts are less needed in firms with strong corporate governance. 44 Therefore, firms with weak CG should have large dividend payouts to compensate for their weak shareholder rights. Since dividend payouts help to reduce managerial expropriations through a decrease in free cash flows, dividend payouts and CG are expected to have an inverse relationship 38 and Under weak governance, dividends act as substitutes for poor investor protection. Many studies have demonstrated the substitution effect of dividends. For example, CG strength is inversely associated with dividend payouts. 38 , 45 – 48 The strength of corporate governance is measured by using CG index of Gompers (2003). 49 Reference 50 analyzed a sample of master limited partnerships and reported that low-quality governance firms make high dividend payments; however, these payments are value-destroying, as they negatively affect firms’ cash holdings and firm value. CG can be effectively substituted by dividends to reduce agency costs. 48 Reference 51 found a significant negative association between dividend policy and CG mechanisms, such as being familiar with auditors, timeliness, and shareholder rights. Managerial entrenchment is positively associated with both the level and propensity for dividend payouts. 52 Using the governance index of Gompers 49 along with institutional block holdings and board structure, Ref. 45 report a negative relationship between dividend payouts and governance quality in favor of the substitution effect. In contrast to low-quality governance firms, firms with high quality governance predicted as dividend payers tend to make fewer dividend payments. 47 , 53 He further argued that, in firms with weak governance, dividend initiation receives a positive response from shareholders, indicating the substitution of dividends for weak governance. In Chinese firms, prominent conflicts of interest exist between minority shareholders and large dominant shareholders, and there are more expropriation opportunities for majority shareholders due to weak investor protection and creditor rights. 6 , 54 Minority shareholders are more likely to suffer from self-serving behavior, such as excessive compensation, expropriation, and tunneling. Because Chinese firms suffer from weak shareholder protection and poor CG (e.g., minority-majority shareholder conflicts and state-owned equity control), they tend to pay high dividends as a governance control mechanism. 4 , 6 In other words, Chinese firms are likely to use dividends as substitutes for poor governance to reduce conflicts between minority and majority shareholders. Considering Chinese firms as a sample for our research study, we develop the following hypothesis: H1: Firms with strong (weak) corporate governance tend to pay low (high) dividends. 2.2 CSR and Dividend Policy The growing interest in corporate social responsibility and increased importance of dividend policy in corporate finance literature based on its “puzzle” like nature have attracted researchers’ attention to explore the nature of link between them and the theories underlying this relationship. However, most of the literature (e.g., Refs. 14 , 55 , 56 , 57 ) focuses on developed economies, and only a few studies have explored this relationship in emerging economies, such as China and few others (e.g., Refs. 58 , 59 ). According to Ref. 56 , the link between CSR and dividend policy is guided through two channels: the earnings channel and equity cost of the capital channel. Our hypotheses on the CSR dividend policy link are based on these two CSR views on dividends. According to the cost of equity capital channels, instead of paying dividends, firms tend to hold or invest cash because their involvement in CSR activities can reduce the equity cost of capital through its risk premium. 56 , 60 A firm’s CSR practices lower its financial constraints either by reducing the cost of bank loans or the cost of capital. 61 , 62 High CSR reduces equity capital costs by lowering the associated risk premium because socially responsible firms tend to enjoy good reputations, 63 , 64 have good management practices and low information asymmetry, 57 , 65 align interests between shareholders and other stakeholders, 66 loyal customers or investors 67 , 68 and have low risk and good governance. 69 Since the opportunity cost of holding cash is low (high) in the case of a low (high) equity cost of capital, firms’ incentives to hold cash increase (decrease). 70 On the other hand, firms might have more (less) incentives to use cash for investment purposes because financial constraints are less (more) strict for firms in the case of lower (higher) equity cost of capital. 56 , 58 , 71 Moreover, being financially less constrained, CSR firms can invest in projects that appear unprofitable and unfeasible because of high capital costs and low availability of external finance. These arguments suggest that CSR involvement reduces the equity cost of capital because firms are more likely to hoard or invest cash instead of paying dividends. In other words, the equity cost of the capital view of CSR and dividend policy links predicts a negative association between CSR and dividend policy. In contrast to the first CSR view of dividends, the earnings channel view argues that CSR affects dividend policies through its effect on earnings. Earnings have been identified as a crucial determinant of dividend policy and firms with greater earnings ability are more likely to pay dividends. 72 , 73 Socially responsible firms tend to have enhanced earnings, which leads to higher dividend payments. The mechanisms through which CSR-related activities enhance firms’ earnings include efficient management and good relationships with stakeholders. 74 – 76 A better firms-stakeholder connection helps in developing competitive advantage, 77 , 78 reducing transaction costs, 79 cash flow shocks in the occurrence of some negative events 80 and lower firm risk. 56 In addition, CSR activities are associated with higher ethical standards and greater transparency, 81 – 83 enhanced corporate reputation, 84 greater customer loyalty, high commitment of employees, a high degree of suppliers’ cooperation 85 and a reduced annual labor turnover rate. 86 , 87 These factors significantly contribute to the earnings-generating ability of firms with strong involvement in CSR activities, which, in turn, increases their dividend payouts and enables them to pay dividends (if non-payers). Based on the preceding arguments, firms’ involvement in CSR activities can result in dividend payouts through increased earnings, as CSR activities are considered positive net present value projects. Hence, stronger CSR involvement puts firms in a better position to pay dividends and to pay higher dividends. The earnings view predicts a positive association between CSR and dividend policy. Reference 88 examined CSR and dividend policies in India. They revealed that CSR has a constructive influence on dividend disbursements. In addition, 89 explore how CG influences the link between information asymmetry and dividend disbursement in an emerging economy. They found that dividend payouts are inversely inclined by information asymmetry issues. They also find that the link between information asymmetry and dividend strategy is less prominent in companies with robust CG systems. This finding is in line with the argument that companies encounter lower agency and asymmetric information issues when they pay higher dividends. From the perspective of Chinese firms, evidence on the link between CSR and dividend payouts remains ambiguous. For example, Ref. 58 provide evidence in favor of earnings channels, while Ref. 12 support the equity cost of capital channels. Therefore, based on the two divergent views on the link between CSR and dividends, we develop the following hypotheses: H2a: Firms with involvements in CSR activities tend to pay low dividends (equity cost of capital channel). H2b: Firms with involvements in CSR activities tend to pay high dividends (earnings Channel). 2.3 The mediating role of CSR As the function of CSR is to make firms accountable to their stakeholders, firms committed to CSR practices can identify and assess the demands of different stakeholders. These CSR commitments facilitate a strong link between a firm and its stakeholders by considering their needs and demands. According to Ref. 90 , CG and CSR are interdependent, and CSR as a firm’s obligation to society can be regarded as an external mechanism of corporate governance. The main argument in this paper is that CG is likely to influence the corporate social responsibility (negatively/positively), which in turn influences dividend payments. Our expectation of CSR’s mediating role in the link between CG and dividend policy is based on two arguments. First, in the context of stakeholder theory, firms with effective CG invest more in CSR to ensure the protection of all stakeholders beyond shareholders. 91 , 92 Further, the earnings channel predicts that firms with stronger CSR involvement are expected to pay higher dividends. 83 , 93 Based on these theories, it is argued that better CG can result in high CSR involvement, which in turn leads to high dividend payments through the increased reputation and earnings of the firm. Therefore, CSR is expected to facilitate a link between CG and dividend policies. Second, stakeholder theory suggests that better-governed firms provide interest protection to all stakeholders beyond shareholders by investing more in CSR. In addition, the cost of equity channels suggests that firms with stronger CSR involvement tend to pay low dividends, as in this case, firms prefer to hoard or invest cash instead of paying dividends due to the low cost of equity. 56 , 94 Accordingly, it is argued that better CG can result in high CSR involvement, which, in turn, reduces dividend payments because of a firm’s preference to hoard cash or invest it instead of dividend payments. In this context, we expect CSR to mediate the link between CG and dividend policy. The following hypothesis was developed to test our arguments regarding mediation: H3: CSR mediates the link between corporate governance and dividend policy. 2.4 Conceptual framework Corporate governance plays a critical role in shaping firms’ financial and non-financial strategic decisions. According to the principles of Corporate Governance, governance mechanisms such as board independence, ownership monitoring, and transparency are designed to align managerial decisions with the long-term interests of shareholders and stakeholders. Traditional perspectives grounded in agency theory argue that dividend payments function as a mechanism to reduce agency conflicts between managers and shareholders by limiting free cash flow available for managerial discretion. However, contemporary corporate governance frameworks increasingly emphasize broader stakeholder responsibilities. Drawing on stakeholder theory, firms with stronger governance structures may prioritize long-term value creation through investments in sustainability initiatives rather than maximizing short-term shareholder distributions. One such strategic channel is engagement in CSR, which reflects a firm’s commitment to environmental, social, and governance considerations. Under this perspective, the mechanisms of governance may affect the decision of the firm on the payment of dividends indirectly by encouraging the firm to invest resources in socially responsible activities, which improve the reputation of the firm. Thus, firms with better governance may pay less on dividends as resources are invested in CSR activities. Based on the arguments above, the conceptual framework of mediation to explore the link between CG and dividend policy with the mediating impact of CSR is shown in Figure 1 . Figure 1. CSR mediating influence of corporate governance in the governance-dividend relationship. Open in a new tab This figure illustrates the mediation analysis results, showing the direct and indirect effects of governance mechanisms on dividend payout through CSR engagement. Path coefficients are reported with significance levels. 3. Methodology 3.1 Sample description Firms listed on the Shanghai and Shenzhen stock exchanges are considered as a study sample to investigate the link between CG and dividend policy with the mediating role of CSR. The sample is selected using the 2012 China Securities Regulatory Commission (CSRC) industry classification, under which the firms are categorized into 19 different industrial sectors. The data collection period ranged from 2012 to 2021 based on data availability and an attempt to use the most recent data as much as possible. The final sample included 15,800 firm-year observations. 3.2 Data sources CSR data were collected from the Hexun database, which offers the CSR evaluation score of listed Chinese firms beginning in 2010. Many previous studies have used CSR data from this database. 58 , 95 – 98 To appraise the corporate social responsibility performance of Chinese firms, Hexun.com ranks first, and provides a good and comprehensive source of CSR data. 58 , 96 Moreover, it comprehensively covers all critical stakeholder groups, including shareholders, employees, suppliers, customers, environment, and community in its assessment framework. 96 The data on all other variables, including CG and control variables, were collected from the China Stock Market and Accounting Research (CSMAR) database. 3.3 Research variables The dependent variable is the dividend policy, for which the dividend payout ratio (DPR) is used as a proxy. Many researchers have used the dividend payout ratio as a proxy for dividend policy for example, Refs. 36 , 56 , 58 and 99 – 102 . The dividend payout ratio (DPR) was calculated as dividends per share divided by earnings per share. We use this measure because, according to Refs. 24 and 93 , it establishes a direct connection between distribution and earnings. The independent variable corporate governance was measured using the corporate governance index (CGI). CG is considered a multidimensional notion, defined as the mechanism used for the protection of different stakeholders’ interests. 103 Many cultural, economic, environmental, legal, historical, and political factors affect corporate governance. This study builds the CGI using 35 items adapted from the prior literature of Asiedu and Mensah (2023), 104 Ledi and Ameza-Xemalordzo (2023), 105 and Munisi and Randøy (2013). 106 The items cover key aspects of corporate governance, including board structure, audit and remuneration committees, transparency and disclosure, and shareholders’ rights. To calculate the CGI, we first computed sub-indices for each governance dimension. Each item was assigned a score of 1 if the statement applied to the firm and 0 if it did not. The sub-indices A detailed list of items along with coding rules is provided in Table 1 . Table 1. The Composition of Corporate Governance Index (CGI). No. CG Indicators If statement is true/not 1. BODs (Sub Index I) a. CEO duality exists; CEO is also the board’s Chairperson 1/0 b. Board’s chairperson is non-executive director 1/0 c. Company specifies the directors’ categories 1/0 d. At least 2/3 of the board is consist of non-executive directors 1/0 e. Company shows the number of board meetings held 1/0 f. Board has a committee for CG 1/0 g. Board has a nomination committee 1/0 2. The Audit Committee (Sub Index II) a. Company has an audit committee 1/0 b. The audit committee’ s chairperson is a non- executive director 1/0 c. All committee members are non-executive directors 1/0 d. Board’s chairperson and the audit committee chairman/its members are different individuals 1/0 e. Company shows the number of committee meetings held 1/0 3. Transparency & Disclosure (Sub Index III) a. Company has a remuneration committee 1/0 b. The remuneration committee’s chairperson is a non-executive director 1/0 c. All committee members are non-executive directors 1/0 d. Company shows the number of committee meetings held 1/0 4. The Remuneration Committee (Sub Index IV) a. The composition of remuneration committee is disclosed by the company 1/0 b. The composition of audit committee is disclosed by the company 1/0 c Each director’ total remuneration is disclosed by the company 1/0 d. The CEO’ remuneration is disclosed by the company 1/0 e. The senior officers’ professional/work qualification is disclosed by the company 1/0 f. The senior officers’ academic qualification is disclosed by the company 1/0 g. The senior management team’s remuneration is disclosed by the company 1/0 h. The directors’ professional/work qualification is disclosed by the company 1/0 i. The directors’ academic qualification is disclosed by the company 1/0 j. The ages of directors are disclosed by the company 1/0 k. Each director’s appointment date is disclosed by the company 1/0 l. The external auditor of the company is “big 4” audit firm 1/0 m. The details of share ownership are disclosed by the company 1/0 n. Company displays information on performance of stock market & stock prices 1/0 o. Company shows remarks on its financial outcome 1/0 p. Company provides information on its activities concerning social responsibility 1/0 5. Rights of Shareholders (Sub Index V) a. Company exercises the principle of one share -one vote 1/0 b. All directors are elected every year 1/0 c. Company shows that proxy voting is allowed 1/0 Open in a new tab Corporate Social Responsibility (CSR) is used as a mediator. This is calculated using firms’ CSR scores from the Hexun database. This database calculates the CSR scores of Chinese listed firms based on five dimensions: employees, environment, community, supplier and customer, and investors. Each of these dimensions further consists of different sub-dimensions and is given different weights depending on the industries to which the firm belongs. Consistent with previous studies (e.g. Refs. 58 , 96 , 98 , 107 ), we calculated CSR scores as a total of four sub-social responsibility scores: employees, environment, community, supplier, and customer. First, the individual score for each sub-dimension was calculated, and then the aggregate score was calculated as the average of the sub-dimensions’ individual scores. The aggregate measure of CSR in this study replicates the overall extent of companies’ CSR activities and stakeholder-oriented innovations. While such scores are broadly employed in empirical research, they might partially capture companies’ disclosure practices or reputation of management efforts rather than the complete substantive effect of their environmental and social actions. Consequently, in this study, the CSR measure is interpreted mainly as an indicator of companies’ governance-related engagement with CSR practices across key stakeholder realms. In addition, we control for previously identified factors that can affect dividend policy. To consider the firm’s financial condition, we include firm size, leverage, market-to-book ratio, profitability, ratio of retained earnings to total assets, and research and development expenditure as control variables. Firm size (SZ) is expected to affect both firms’ debt and dividend policies. 108 Larger firms are more diversified, have less volatility and more regular cash flows, and can maintain debt at high levels, as they are less likely to go bankrupt 109 and large firms with good financial conditions usually pay dividends. 110 Because leveraged firms are riskier in their cash flows and try to avoid external capital costs 16 , 111 therefore firms’ dividend behavior is also expected to be affected by leverage. According to Ref. 112 , through the market to book ratio (MTB), firms convey information to shareholders about their smooth dividend payments; hence, MTB is also added as a control variable. Moreover, profitability (ROA) is also considered an important determinant of dividend policy in the literature and is expected to influence dividend behavior because it reflects a firm’s resource availability after investments are funded. 6 , 113 R& D expenditure is used as a proxy for firm growth opportunity and is expected to influence dividend policy because as compared to non-growth firms, growth firms pay fewer dividends. 114 , 115 Further, the ratio of retained earnings to total assets (RETA) significantly determines dividend payouts, and firms with a higher proportion of earned capital instead of contributed capital tend to pay more dividends; therefore, Ref. 116 added RETA as a control variable in the model. A summary of the variables, their calculations, and data sources is provided in Table 2 . Table 2. Variables’ Measurements and Data Sources. Variables Abbre. Calculation Reference Data source Dividend payout DPR Dividend per share/earnings per share 6 , 117 CSMAR database Dividend dummy DD DD=1 if firm is dividend payer, 0 otherwise. 38 , 118 Authors own calculation Corporate Governance Index Corporate Social Responsibility Firm Size CGI CSR SZ Aggregate score of five sub-indices of CG including BODs, disclosure& transparency, audit committee, remuneration committee, and shareholder rights Aggregate score of CSR dimensions including community, environment, customer& supplier, and employee Natural log of total assets 106 58 , 96 , 98 6 , 100 , 118 Authors own calculation. Information on CG indicators is collected from CSMAR database including annual reports of firms Hexun database CSMAR database Return on Assets ROA EBIT/total assets 50 , 117 , 118 CSMAR database Market to Book Ratio MTB Market Value/book value of common stocks 36 , 98 CSMAR database Leverage LEV Total debts/total assets 36 , 38 , 50 , 58 CSMAR database Retained Earnings to Total Assets RETA Retained earnings/total assets 109 , 119 CSMAR database Research and Development expenditures R&D R&D expenditures/total assets 115 CSMAR database Open in a new tab 3.3 Estimation model To investigate the mediating impact of CSR on the causal link between CG and dividend policy, we used a fixed-effects regression model identified through panel data model identification tests. Our analysis is based on the mediation approach suggested by Baron and Kenny, 120 which consists of the following steps. DPR it = β 0 + β 1 CGI it + β 2 SZ it + β 3 ROA it + β 4 MTB it + β 5 LVG it + β 6 RETA it + β 7 R & D it + ε it (1) CSR it = β 0 + β 1 CGI it + β 2 SZ it + β 3 ROA it + β 4 MTB it + β 5 LVG it + β 6 RETA it + β 7 R & D it + ε it (2) DPR it = β 0 + β 1 CSR it + β 2 SZ it + β 3 ROA it + β 4 MTB it + β 5 LVG it + β 6 RETA it + β 7 R & D it + ε it (3) DPR it = β 0 + β 1 CGI it + β 2 CSR it + β 3 SZ it + β 4 ROA it + β 5 MTB it + β 6 LVG it + β 7 RETA it + β 8 R & D it + ε it (4) First, the effect of the independent variable (CGI) was tested on the dependent variable (DPR). Here, the independent variable was expected to show a significant relationship with the dependent variable. In the second step, the link between the mediation variable (CSR) and the independent variable is tested, and the independent variable is expected to have a significant influence on the mediator. In the third step, the effect of the mediation variable on the dependent variable was tested, and the results needed to be significant. In the final step, both the independent variable and mediator were tested on the dependent variable. Here, the effect of the independent variable (beta coefficient of CGI in the final regression model) on the dependent variable is expected to be less in absolute terms compared to the effect in the first regression model. 1 4. Empirical Results and Discussion 4.1 Data Description Table 3 presents the summary statistics of all the study variables. Summary statistics provide an overall picture of the data, including the mean, standard deviation, and minimum and maximum values of the variables for the sampled Chinese firms. The dependent variable DPR has a mean value of 0.227, which means that Chinese firms pay, on average, 22.7% of their earnings in dividends. The average value of DPR is closer to 0.268 (26.8%), as documented by Ref. 58 for a sample of Chinese listed firms. Although this value of the payout ratio falls within the range (20%-30%) fixed by the CSRC, it is quite low. The reason behind This is because minority shareholders’ rights in China are not strong enough to pressure firms to pay dividends. The average CGI score is 0.558, ranging from a low score of 0.221 to a high score of 0.814, which means that, on average, sample firms meet half of the governance standards. The average CSR score of Chinese listed firms is 25.68, which is quite low. The mean value of firm size is 22.118 (similar to 21.60 reported by Ref. 121 and ROA is 0.052, which means, on average, our sampled firms are relatively large and less profitable. The sampled firms have an average debt ratio of 44.64%, indicating their dependency on the debt market, as they rely on the debt market for almost 44.64% of their total assets. The mean values of MTB, RETA, and R&D are 3.590, 0.137, and 0.003, respectively. Table 3. Descriptive Statistics. Variables Obs. Mean Std. Dev. Min Max DPR 15,799 0.227 0.230 0.000 0.796 CGI 15,799 0.558 0.084 0.221 0.814 CSR 15,799 25.683 18.441 -18.470 90.870 SZ 15,799 22.118 1.180 20.265 24.561 ROA 15,799 0.052 0.044 -0.039 0.147 MTB 15,799 3.590 2.384 1.083 10.277 LEV 15,799 0.446 0.210 0.104 0.817 RETA 15,799 0.137 0.143 -0.239 0.384 R&D 15,799 0.003 0.011 0.000 0.277 Open in a new tab Note: For abbreviations and detail of variables, see Table 2 . 4.2 Correlation matrix The results of the correlation analysis are presented in Table 4 . The correlation matrix provides useful information on the degree and nature of the associations among the variables under study. The absence of multicollinearity is an important assumption of multiple regression models, and according to Ref. 122 , multicollinearity exists if the correlation among variables exceeds the cutoff point of 0.80 (80%). The results indicate that the correlation among variables ranges from -0.006 (between leverage and CSR) to 0.528 (between RETA and ROA), showing low-to-moderate levels of correlation. The highest value of correlation is 0.528 (52.8%) between RETA and ROA, which falls below the cutoff point; hence, there is no multicollinearity problem in our model. Moreover, the correlation coefficients of CGI and CSR with DPR were both significant and negative. The coefficient of the correlation between CSR and CG appears to be significantly positive. Table 4. Correlation Matrix. DPR CG CSR SZ ROA MTB LEV RETA R&D DPR 1 CGI -0.017 * 1 CSR -0.264 *** 0.021 ** 1 SZ 0.026 *** 0.064 *** 0.306 *** 1 ROA 0.059 *** -0.054 *** 0.095 *** -0.018 * 1 MTB -0.187 *** 0.077 *** -0.208 *** -0.345 *** -0.041 *** 1 LEV -0.220 *** 0.021 ** -0.006 0.475 *** -0.100 *** -0.038 *** 1 RETA 0.133 *** -0.002 0.115 *** 0.051 *** 0.528 *** -0.157 *** -0.165 *** 1 R&D -0.043 *** 0.029 *** -0.075 *** -0.138 *** -0.006 0.196 *** -0.090 *** -0.016 * 1 Open in a new tab Note: N=15,799. Abbreviations and details of the variables are given in Table 2 . * p<0.05. ** p<0.01. *** p<0.001. 4.3 Multivariate analysis To investigate the mediating role of CSR in the link between dividend policy and corporate governance, we use the mediation approach suggested by Baron and Kenny. 120 The results of the mediation analysis are sequentially presented in Table 5 . Table 5. Mediation Impact of CSR on Corporate Governance-Dividend Policy Relationship. Variables Model I (DPR) Model II (CSR) Model III (DPR) Model IV (DPR) Coeff. p value Coeff. p value Coeff. p value Coeff. p value CGI -0.030 0.029 * 9.001 0.000 *** -0.011 0.520 CSR -0.002 0.000 *** -0.002 0.000 *** SZ -0.008 0.000 *** 0.782 0.000 *** -0.010 0.000 *** -0.010 0.000 *** ROA -0.007 0.604 0.031 0.788 -0.009 0.565 -0.008 0.571 MTB -0.004 0.001 ** -0.010 0.018 * -0.003 0.000 *** -0.005 0.003 ** LEV -0.005 0.042 * -0.317 0.044 * -0.004 0.000 *** -0.004 0.000 *** RETA 0.009 0.797 0.136 0.016 * 0.008 0.908 0.008 0.909 R&D -0.557 0.001 ** -38.377 0.002 ** -0.482 0.003 ** -0.478 0.003 ** Const. 0.438 0.000 *** 13.730 0.000 *** 0.407 0.000 *** 0.410 0.000 *** R 2 0.141 0.165 0.152 0.152 F statistic (Prob>F) 5.90 (0.000) 14.51 (0.000) 53.01 (0.000) 46.43 (0.000) Open in a new tab Note: N=15,799. Abbreviations and details of the variables, see Table 2 . * p <0.05. ** p<0.01. *** p<0.001. In Table 5 , Model I shows the results for the first condition of mediation, in which the independent variable CGI had a significant impact on the dependent variable DPR in the absence of the mediator variable. Model II shows the results for the second condition of mediation, revealing that the independent variable CGI significantly affects the mediator variable CSR. Model III shows the results for the third condition of mediation, in which the mediator variable significantly affects the dependent variable DPR. Finally, Model IV shows the results for the fourth condition of mediation, in which the effect of the independent variable on the dependent variable decreases and becomes insignificant after the inclusion of the mediator in the model. This is observed from the beta coefficients and p-values of (-.0300364/0.029 and -.0114956/0.520) contained in model I (DPR) and model IV (DPR), respectively. In model I, our independent variable CG Index is found to have a significant impact on the dividend payout ratio, which confirms the first condition of mediation. The coefficient of the CG index is significantly negative (-.0300364, p<0.05), supporting H1, which states that firms with strong CG practices tend to pay low dividends. The results of Model I provide evidence in favor of the substitution hypothesis of agency theory that dividends act as a substitute for weak corporate governance. In Chinese firms with weak governance, minority shareholders are likely to face strong expropriation from majority shareholders, which results in agency conflicts between them and, hence, the associated agency cost. Dividend policies can help mitigate agency costs. 123 Moreover, in firms with poor investor protection, a dividend policy is important for building a strong image by maintaining good relationships with investors. 25 , 100 Therefore, weak CG firms tend to pay high dividends, and hence, in the weak shareholder rights scenario, high dividends act as substitutes for weak governance. 42 However, firms with strong governance are less exposed to these expropriations and experience low agency costs; therefore, they do not need to pay high dividends, indicating an inverse link between dividend policies and corporate governance. Our results are consistent with the findings of previous studies supporting the substitution effect of dividends that firms with high-quality governance tend to pay less dividends (see e.g. Refs., 42 , 45 – 48 , 51 ). Among the control variables, firm size, MTB, leverage, and R&D are significantly and negatively related to the dividend payout ratio (see e.g. Refs. 36 , 112 ) while ROA showed an insignificant negative relationship with the dividend payout ratio, consistent with the findings of Refs. 35 and 50 . In Model II, the coefficient of the CG index is highly significant and positive (9.000815, p<0.001), indicating that firms with good CG tend to make more CSR investments. These results are in accordance with stakeholder theory, which states that apart from shareholders, the consideration of the interests of other stakeholders (e.g., environment, supplier and customers, community, and employees) is critical for corporate success. 124 Moreover, our results are in line with the conflict resolution hypothesis, which suggests that firms with effective governance tend to be more socially responsible for resolving conflicts of interest among stakeholders because different stakeholders may have different objectives. 92 , 125 If these conflicts remain unresolved, they may degrade firm performance. Therefore, in firms with effective corporate governance, managers are more likely to engage in CSR activities to resolve conflicts and maximize shareholder wealth. 126 , 127 Our results for Model II are consistent with those of Refs. 67 , 93 and 95 . The significant impact of the CG index on the mediator variable CSR confirms the second condition of mediation. Among the control variables, size is significantly and positively related to dividend payout ratio, while MTB, leverage, and R&D are significantly and negatively related to dividend payout ratio. ROA and RETA remain insignificant. Model III shows that CSR has a significant negative impact on the dividend payout ratio (-.0020641, p<0.001), indicating that firms with CSR engagements tend to make fewer dividend payments. The results of model III provide evidence for hypothesis H2a and favor the equity cost of the capital channel, which suggests that firms’ CSR involvement reduces the cost of equity capital because these firms are more likely to hoard or invest cash instead of paying dividends. As socially responsible firms enjoy a good reputation, 63 , 64 have good relationships with stakeholders and are financially less constrained, 58 , 71 therefore they may have more incentives to hold or invest cash instead of paying dividends. An alternative explanation for the inverse relationship between CSR and dividends, based on the residual theory of dividends, might be that CSR firms tend to pay fewer dividends because CSR investments are costly, so nothing is left to pay as dividends. 56 , 59 Findings in Model III confirmed the third condition of mediation. Finally, Model IV shows the impact of CG on dividend policy in the presence of CSR (the mediation effect). The coefficient of the CG index is negative but insignificant (-0.0114956, p>0.05), whereas the coefficient of CSR is significantly negative (-.0020599, p<0.001). Moreover, the value of the CG index coefficient (-.0114956) in Model IV decreased from its value (-.0300364) in Model I, which means that the causal impact of CG on dividend payout ratio is significantly influenced by the presence of CSR. These findings confirm the fourth condition of mediation and provide evidence in favor of our mediation hypothesis H3. The decrease in the coefficient of the CG index in Model IV indicates that CSR mediates the link between CG and the dividend payout ratio. Our results in Model IV are in favor of our second argument about the mediating role of CSR in corporate governance- dividend policy association, which states that better CG leads to high CSR involvement, which in turn reduces dividend payments because of a firm’s preference to hoard cash or invest it instead of paying dividends; hence, CSR mediates the link between CG and dividend policy. The empirical results show that the strength of corporate governance is negatively related to the level of dividend pay-out. This implies that well-governed companies may strategically manage their financial resources, where investments in long-term growth are prioritized over paying out a larger proportion of profits to shareholders. Although the traditional theory of agency assumes a positive relationship between the strength of corporate governance and the level of dividend payout to reduce the problem of managerial opportunism, recent studies suggest a different explanation (see e.g. Refs., 42 , 45 – 48 , 51 ). It has been argued that well-governed companies may have better systems in place to allow their management to undertake long-term strategic investments. Hence, the financial resources may not be paid out to shareholders to undertake value-creating investments in the future, such as innovation, sustainability, and CSR projects. Thus, the negative relationship may imply a shift in the focus of companies from short-term financial payout to long-term value-creating strategies facilitated through effective governance systems. Similarly, the mediation analysis clearly shows that CSR partially mediates the relationship between corporate governance and dividend policy. This implies that the impact of corporate governance on the dividend policy of firms is not just direct, but it is also indirect through the impact it has on the firms’ CSR activities. Governance structures are associated with firms that have more comprehensive approaches to CSR activities, given the level of transparency involved, which forces firms to be accountable to their stakeholders. This, in turn, implies that the firms will need more resources, which could have been used to pay dividends, but the resources are being retained by the firms. The fact that CSR has a partial mediation effect implies that it is a strategic factor through which governance structures affect the firms’ financial policy, given the fact that it is through socially responsible investments that firms are encouraged to reinvest their profits. 4.4 Robustness tests 4.4.1 Alternative measure of dividend policy To check the robustness of our main results on the mediating role of CSR in corporate governance–the dividend policy link–we used a dividend dummy (DD) as a proxy for dividend policy. 42 , 118 Our dividend dummy takes the value of 1 if the firm is a dividend payer and zero if the firm does not pay dividends. Table 6 shows the results of the logistic regression models in which the dividend dummy (DD) was used as a dependent variable. Models I, II, III, and IV provide the results for the first, second, third, and fourth conditions of mediation, respectively. In Model I, the CG index was found to have a significant negative impact (-.0927383, p<0.05) on dividend policy, confirming the first condition of mediation in the main model. The results of Model II indicate that the CG index’s impact on CSR is highly significant and positive (7.688139, p<0.001). In Model III, the coefficient value of CSR is -.0689057, with p<0.001 showing a highly significant negative impact on dividend policy. Model IV indicates that the coefficient of the CG index became insignificant after the inclusion of mediator CSR, again supporting our second argument on the mediating role of CSR in the corporate governance-dividend policy link. Overall, the results of the logistic regression analysis are consistent with our main findings presented in Table 5 and support the mediation effect of CSR on the corporate governance- dividend policy relationship. Table 6. Mediation Impact of CSR on Corporate Governance-Dividend Policy Relationship. (Logistic Regression Model with Dividend Dummy (DD) as a Dependent Variable) Variables Model I (DD) Model II (CSR) Model III (DD) Model IV (DD) Coeff. p value Coeff. p value Coeff. p value Coeff. p value CGI -0.092 0.023 * 7.688 0.000 *** -0.046 0.838 CSR -0.068 0.000 *** - 0.021 0.000 *** SZ -0.412 0.000 *** 1.097 0.000 *** 0.229 0.000 *** 0.358 0.000 *** ROA -0.011 0.758 -0.014 0.903 -0.038 0.578 -0.015 0.686 MTB -0.154 0.000 *** -0.682 0.000 *** -0.133 0.000 *** -0.148 0.000 *** LEV -3.288 0.000 *** -4.912 0.000 *** -2.802 0.000 *** -3.287 0.000 *** RETA 1.989 0.000 *** 6.241 0.000 *** 1.882 0.000 *** 1.990 0.000 *** R&D -5.916 0.001 ** -28.906 0.018 * -3.896 0.032* -5.451 0.002 ** Const. -6.428 0.000 *** 9.574 0.004 ** -4.211 0.000 *** -5.522 0.000 *** Pseudo R 2 0.128 0.188 0.231 0.145 Open in a new tab Note: N=15,799. Abbreviations and details of the variables, see Table 2 . * p <0.05. ** p<0.01. *** p<0.001. 4.4.2 Sobel test We conducted a Sobel test of mediation to evaluate the significance of the mediation effect of CSR and confirm our main results on the mediating role of CSR that CSR carries the influence of CG on dividend policy. The Sobel test is used to test the statistical significance of a mediation effect 128 and is helpful in determining whether there is a significant reduction in the independent variable’s effect on the dependent variable after the inclusion of the mediator. 129 Moreover, the Sobel test is appropriate for large samples, and our sample size is quite large. Therefore, using the Sobel test to confirm the mediation effect is applicable in our study. The results of the Sobel test presented in Table 7 confirm the significance of CSR’s mediation effect on the link between CG and dividend policy. Hence, the results of the Sobel test also provide further support for our main finding that CSR influences CG on dividend policy. Table 7. Mediation Impact of CSR on Corporate Governance-Dividend Policy Relationship. (Sobel Test Results) Inputs Test Statistics T. Values St. Error p value a 0.197 Sobel test -5.059*** 0.005 0.000 b -0.392 Aroian test -5.057*** 0.005 0.000 S a 0.066 Goodman test -5.061*** 0.005 0.000 S b 0.052 Open in a new tab Note: In Table 7 , a is the regression coefficient for the link between the mediator and independent variables, and b is the regression coefficient for the link between the mediator and dependent variable (in the presence of an independent variable). S a and S b are the standard errors of the coefficients a and b, respectively. 4.4.3 Endogeneity bias In accounting research, endogeneity is a common problem that can arise due to omitted variables, explanatory variables, and other instantaneous consequences. 130 , 131 Until now, we have explored the one-way effect of CG on dividend policy. Reverse causality is implausible because any change in CG requires shareholder approval, and managers consider the governance structure as predetermined. 132 On the other hand, dividends are generally determined at managerial discretion. Hence, the former decision is more important than the latter. Thus, causality is likely to be from CG to dividend policy, as reported in the literature (e.g. Refs. 10 , 36 , 123 , 133 ). However, CG and dividend policy may be endogenously determined, and reverse causality may occur from dividend policy to corporate governance. Therefore, to address possible endogeneity bias/reverse causality, we use the GMM model to re-estimate the main model. The results of the GMM model are presented in Table 8 , which indicate that there is no endogeneity bias because the p-values of the Sargan test, Hansen test, and AR 2 are all insignificant. Moreover, the signs and coefficients are similar to those of the main models. Table 8. Mediation Impact of CSR on Corporate Governance-Dividend Policy Relationship. (GMM Model Results) Variables Model I (DPR) Model II (CSR) Model III (DPR) Model IV (DPR) Coeff. p value Coeff. p value Coeff. p value Coeff. p value L1 0.618 0.000 *** 0.375 0.000 *** 0.183 0.000 *** 0.182 0.000 *** CGI -0.068 0.013 * 21.499 0.000 *** -0.043 0.346 CSR -0.001 0.000 *** -0.001 0.000 *** SZ -0.004 0.021 * 1.300 0.000 *** -0.008 0.000 *** -0.008 0.000 *** ROA -0.014 0.000 *** 0.438 0.000 *** -0.018 0.000 *** -0.020 0.000 *** MTB -0.001 0.000 *** -0.004 0.000 *** -0.002 0.000 *** -0.002 0.000 *** LEV -0.003 0.023 * -1.649 0.000 *** -0.026 0.000 *** -0.029 0.000 *** RETA 0.001 0.000 *** 0.105 0.000 *** 0.002 0.000 *** 0.002 0.000 *** R&D -0.762 0.000 *** -101.756 0.000 *** -1.172 0.000 *** -1.189 0.000 *** Const. 0.226 0.000 *** 28.114 0.000 *** 0.371 0.000 *** 0.418 0.000 *** Wald χ 2 1729.79 1205.25 1804.59 1905.99 Prob 0.000 0.000 0.000 0.000 AR 1 (Prob) 0.000 0.000 0.000 0.000 AR 2 (Prob) 0.341 0.214 0.490 0.512 Sargan test (Prob) 0.789 1.000 0.918 1.000 Hansen test (Prob) 0.592 0.329 0.298 0.743 Open in a new tab Note: N=15,799. Abbreviations and details of the variables, see Table 2 . * p <0.05. ** p<0.01. *** p<0.001. The omitted variable bias may also cause another type of endogeneity. The link between CG quality and dividend payouts is deemed to be spurious because both can be simultaneously determined by omitted variables. 10 To control for simultaneity, we used the lagged values of the predictor variables to re-estimate the main model. The results are presented in Table 9 , which are consistent with our main findings in Table 5 . Hence, our results are insensitive to endogeneity. Table 9. Mediation Impact of CSR on Corporate Governance-Dividend Policy Relationship. (Model Estimation Using Lagged Values of Predictor Variables) Variables Model I (DPR) Model II (CSR) Model III (DPR) Model IV (DPR) Coeff. p value Coeff. p value Coeff. p value Coeff. p value CGI -0.045 0.036 * 8.481 0.000 *** -0.017 0.418 CSR -0.003 0.000 *** -0.003 0.000 *** SZ -0.005 0.001 ** 4.193 0.000 *** -0.008 0.000 *** -0.008 0.000 *** ROA -0.001 0.037 * 0.236 0.043 * -0.002 0.016 * -0.002 0.018 * MTB -0.004 0.000 *** -0.014 0.044 * -0.003 0.000 *** -0.003 0.000 *** LEV -0.034 0.029 * -1.247 0.016 * -0.030 0.048 * -0.030 0.024 * RETA 0.001 0.085 0.045 0.036 * 0.003 0.035 * 0.003 0.038 * R&D -0.731 0.000 *** -41.999 0.000 *** -0.593 0.000 *** -0.588 0.000 ** Const. 0.145 0.000 *** 61.593 0.000 *** 0.346 0.000 *** 0.354 0.000 *** R 2 0.162 0.175 0.185 0.206 F statistics (Prob> F) 15.31 (0.000) 190.23 (0.000) 213.49 (0.000) 186.94 (0.000) Open in a new tab Note: N=15,799. Abbreviations and details of the variables are given in Table 2 . * p<0.05, ** p<0.01, *** p<0.001. 5. Conclusion Many studies have examined the causal impact of CG on dividend policies. However, the mechanism by which CG affects dividend policies in the presence of CSR remains unexplored. The key intention of this study was to answer the question of whether CSR mediates CG’s impact on firm dividend policy. To find the answer, we developed two arguments about the mechanism through which CSR can mediate the CG – dividend policy relationship. According to our first argument, we expect that CSR acts as a mediator because firms with strong CG tend to make more CSR investments to guarantee the interest protection of all stakeholders than shareholders (stakeholder theory), and firms with CSR involvement are anticipated to pay more in dividends (earnings channel). Second, since firms with better governance are more likely to invest in CSR-related activities (stakeholder theory) and because of low equity costs, firms tend to pay low dividends when they are involved in CSR activities, as they prefer to hold cash or invest it instead of dividend payments (cost of equity channel). Hence, we hypothesize that CSR could mediate the link between CG and dividend policies. We used a sample of Chinese listed firms for the period–2011-2021 (consisting of 15,799 firm-year observations) to identify the mediating impact of CSR by applying Baron and Kenny 120 mediation method. Our results indicate that the causal link between CG and dividend policy is mediated by CSR, which implies that firms’ investments in CSR have a significant influence on this causal link. Compared to corporate governance, CSR has a more dominant impact on firms’ dividend policy decisions. Further, the results support our second argument about the CSR mediation role that better-governed firms tend to invest more in CSR to protect all stakeholders. As a result, they prefer to hold or invest cash instead of paying dividends because CSR engagements lower the cost of equity capital. The implication of our findings is that better-governed Chinese firms are more likely to engage in CSR to safeguard their stakeholders, and they do not need to use costly dividends to convey private information on their daily operations to their investors because firms’ CSR activities provide more useful and precise information. Our findings are corroborated by a set of robustness tests, including logistic regression, the Sobel test, and possible endogeneity bias. Overall, the current study found important implications of the evolving role of corporate governance on the financial and sustainability strategies of firms. Firms with better corporate governance practices seem to allocate resources to CSR activities to maximize long-term stakeholder returns rather than distributing short-term shareholder returns. The mediating role of CSR between corporate governance and financial policy provides support for the importance of incorporating the relationship between CSR and financial policy. 6. Implications and limitations Our results show that CSR carries the CG influence on dividend policy decisions has implications for firms, regulators, and investors. For firms, our findings suggest that weak CG can be substituted with high dividend payouts to compensate for poor investor protection and maintain good relationships with investors. For investors, our findings that better-governed firms invest more in CSR suggest that investors should pay close attention to firms’ CSR engagements while making investment decisions because socially responsible firms can provide better protection to investors due to their strong CG structure and as compared to dividends, CSR activities can also be an indicator of meaningful information on firms’ daily activities. For regulators, policymakers are advised to give special consideration to CSR to reduce environmental and social problems and to enhance the related standards to ensure the safety and security of all stakeholders, thereby reducing global accusation and pressure. Firms can use high dividend payouts to compensate for poor investor protection and to maintain good relationships with investors. When making investment decisions, investors are advised to consider socially responsible firms because of their strong CG structure. Finally, policy makers should give special consideration to CSR in order to reduce environmental and social problems and to enhance the related standards to ensure the safety and security of all stakeholders and hence reduce global accusation and pressure. The findings of this study indicate the observed relationships between board composition, CSR, and financial practices; however, they should not be taken to imply definitive inferences on the strategic and ethical priorities of firms. The study makes several contributions to the literature. First, it contributes to the literature on the interface of corporate governance, CSR, and dividend policy by empirically investigating the mediating effect of CSR on the governance-dividend relationship. While there are studies on the individual relationships between corporate governance and CSR and between corporate governance and dividend policy, there is limited research on the mechanisms through which corporate governance affects financial policy through CSR engagement. Second, the study provides empirical evidence on the interface of corporate governance and CSR and its effect on financial policy, thus contributing to the literature on the interface of finance and non-finance corporate objectives. The study provides evidence on the interface of corporate governance and CSR and its effect on financial policy, thus contributing to the literature on the interface of finance and non-finance corporate objectives. Third, the study provides a more nuanced understanding of the effect of corporate governance on financial policy through the engagement of CSR, thus contributing to the literature on the interface of finance and non-finance corporate objectives. Despite the contribution of the current study, it is important to recognize the limitations of the current study. First, although the current study found significant associations between corporate governance, CSR, and dividend policy, it is important to recognize the difficulty of establishing causal relationships between the variables. Second, the current study only focuses on the aggregate measure of CSR. To further explore the relationship between CSR dimensions and financial policy, future studies may attempt to examine the specific dimensions of CSR. Similarly, the findings of this study should not be taken to imply definitive inferences on the strategic and ethical priorities of firms. The results indicate observed relationships between board composition, various CSR factors, and financial practices; however, further research can be conducted to gain a more complete understanding of the concept of corporate social responsibility. Since we considered Chinese firms as study samples, our findings that CSR mediates the causal link between CG and dividend policy may or may not be generalizable to other settings. Future studies could test the mediating impact of CSR in the context of both developed and other emerging economies for international comparability. Declaration Ethical approval statement Not applicable. Funding Statement This research is supported by the MSU Publication Grant (MPG) with Grant ID MPG- PHASE 02-2025. The funders had no role in study design, data collection and analysis, decision to publish, or preparation of the manuscript. [version 3; peer review: 2 approved] Footnotes 1 See: Levisohn, B. (2013). Don’t Ignore Dividends When Investing in China. Emerging Markets Daily, 19 February. Article available at https://www.barrons.com/articles/BL-231B-1394 . 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Roles Zainal Abidin : Referee Copyright: © 2026 Abidin Z This is an open access peer review report distributed under the terms of the Creative Commons Attribution Licence, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. PMC Copyright notice The revised manuscript presents a clear and well-structured analysis of the relationship between corporate governance, dividend policy, and CSR using panel data from Chinese listed firms. The authors have made meaningful improvements compared to the previous version, particularly in clarifying the conceptual positioning of CSR and moderating earlier normative interpretations. The discussion now more appropriately reflects the limitations of CSR as a proxy for ethical or sustainability outcomes, which strengthens the overall credibility of the study. Methodologically, the paper remains sound, employing appropriate panel data techniques and presenting results in a transparent manner. The conclusions are now better aligned with the empirical evidence, avoiding overstatement and maintaining a clearer distinction between financial relationships and broader normative implications. The manuscript is also well written and suitable for the journal’s readership. Overall, the key concerns raised in the previous review have been adequately addressed. The paper is now scientifically sound, and any remaining issues are minor and relate mainly to clarity and conciseness rather than substantive weaknesses. I therefore consider the manuscript suitable for indexing in its current form. Is the work clearly and accurately presented and does it cite the current literature? Partly If applicable, is the statistical analysis and its interpretation appropriate? Partly Are all the source data underlying the results available to ensure full reproducibility? Partly Is the study design appropriate and is the work technically sound? Partly Are the conclusions drawn adequately supported by the results? Partly Are sufficient details of methods and analysis provided to allow replication by others? Partly Reviewer Expertise: CSR and sustainability I confirm that I have read this submission and believe that I have an appropriate level of expertise to confirm that it is of an acceptable scientific standard. F1000Res. 2026 Feb 11. doi: 10.5256/f1000research.192747.r454073 Reviewer response for version 2 Zainal Abidin Zainal Abidin 1 Sekolah Tinggi Ilmu Ekonomi Indonesia Jakarta, East Jakarta, Indonesia Referee Find articles by Zainal Abidin 1 Author information Copyright and License information 1 Sekolah Tinggi Ilmu Ekonomi Indonesia Jakarta, East Jakarta, Indonesia Competing interests: No competing interests were disclosed. Roles Zainal Abidin : Referee Copyright: © 2026 Abidin Z This is an open access peer review report distributed under the terms of the Creative Commons Attribution Licence, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. PMC Copyright notice Journal Scope and Suitability Based on the aims and scope of the journal, this manuscript is generally suitable for the journal’s readership. The topic—linking corporate governance, dividend policy, and CSR—is relevant to scholars interested in corporate finance, governance, and sustainability-related issues, particularly in emerging market contexts. The empirical focus and quantitative approach are consistent with the type of research typically published by the journal. 2. Summary of the Paper and Overall Assessment This paper examines the relationship between corporate governance and dividend policy, proposing corporate social responsibility (CSR) as a mediating mechanism. Using panel data from Chinese listed firms over the period 2012–2021, the authors construct a composite corporate governance index and employ CSR scores from the Hexun database. Fixed-effects panel regressions are used to test both direct and mediated relationships. The main findings suggest that stronger corporate governance is associated with lower dividend payouts, that governance positively influences CSR engagement, and that CSR partially mediates the governance–dividend relationship. Overall, the study offers a solid empirical analysis using a large dataset. However, several conceptual and interpretive issues limit the manuscript’s scientific robustness in its current form. 3. Originality, Relevance, and Contribution The manuscript makes an incremental contribution by explicitly modeling CSR as a mediating mechanism between governance and dividend policy in an emerging market setting. While the topic is relevant and of interest to the journal’s readership, the originality lies more in the empirical configuration than in theoretical development. The contribution would be stronger if the authors more clearly positioned their work within broader debates on CSR and sustainability governance, rather than relying predominantly on an instrumental, agency-based interpretation of CSR. 4. Methodology and Validity The empirical methodology is generally appropriate. The use of panel data, fixed-effects estimation, and standard control variables is consistent with accepted practice in this field. Tables and results are clearly presented, and the analysis appears internally consistent. That said, the study implicitly assumes that higher CSR scores reflect stronger ethical or sustainability-oriented governance. This assumption is not sufficiently discussed or justified, particularly given that CSR scores may capture disclosure intensity or legitimacy-seeking behavior rather than substantive social or environmental impact. Suggestion: The authors should more explicitly acknowledge the limitations of CSR scores as proxies for sustainability or ethical performance and clarify that the analysis primarily captures financial governance behavior. 5. Interpretation of Results and Conclusions The interpretation of the empirical results occasionally goes beyond what the data can directly support. In particular, the discussion suggests that firms are prioritizing social responsibility over shareholder payouts, which introduces a normative interpretation that is not directly evidenced by the analysis. Suggestion: The conclusions should be more cautiously framed, clearly distinguishing between observed financial allocation patterns and broader ethical or sustainability implications. 6. Presentation, Clarity, and Length The manuscript is generally well written and clearly structured. The length is appropriate for the subject matter, and the tables and figures are helpful. Minor improvements in clarity could be achieved by tightening parts of the discussion section, particularly where interpretations become speculative. I did not identify major linguistic issues, although a light stylistic review could further improve clarity in some sections. 7. Aspects Outside My Expertise I do not assess the technical construction of the proprietary CSR scoring methodology itself, as this lies outside my direct expertise. My comments focus on conceptual interpretation rather than the internal mechanics of the CSR index. Is the work clearly and accurately presented and does it cite the current literature? Partly If applicable, is the statistical analysis and its interpretation appropriate? Partly Are all the source data underlying the results available to ensure full reproducibility? Partly Is the study design appropriate and is the work technically sound? Partly Are the conclusions drawn adequately supported by the results? Partly Are sufficient details of methods and analysis provided to allow replication by others? Partly Reviewer Expertise: CSR and sustainability I confirm that I have read this submission and believe that I have an appropriate level of expertise to confirm that it is of an acceptable scientific standard, however I have significant reservations, as outlined above. References 1. : Corporate Social Responsibility Reporting as Substantive and Symbolic Behavior: A Multilevel Theoretical Analysis. Business and Society Review .2016;121(2) : 10.1111/basr.12089 297-327 10.1111/basr.12089 [ DOI ] [ Google Scholar ] 2. : CSR beyond symbolism: The importance of substantive attributions for employee CSR engagement. Journal of Cleaner Production .2024;436: 10.1016/j.jclepro.2023.140440 10.1016/j.jclepro.2023.140440 [ DOI ] [ Google Scholar ] 3. : Meta-analyses on Corporate Social Responsibility (CSR): a literature review. Management Review Quarterly .2022;72(3) : 10.1007/s11301-021-00211-2 627-675 10.1007/s11301-021-00211-2 [ DOI ] [ Google Scholar ] 4. : Corporate social responsibility and dividend policy. Research in International Business and Finance .2019;47: 10.1016/j.ribaf.2018.07.005 114-138 10.1016/j.ribaf.2018.07.005 [ DOI ] [ Google Scholar ] 5. : The relationship between dividend payout and corporate social responsibility: The moderating effect of shareholder friendliness and board monitoring. Journal of Cleaner Production .2023;394: 10.1016/j.jclepro.2023.136297 10.1016/j.jclepro.2023.136297 [ DOI ] [ Google Scholar ] 6. : Mind the gap: The interplay between external and internal actions in the case of corporate social responsibility. Strategic Management Journal .2016;37(13) : 10.1002/smj.2464 2569-2588 10.1002/smj.2464 [ DOI ] [ Google Scholar ] F1000Res. 2026 Mar 15. Hussaini Bala Hussaini Bala 1 Accounting, Tishk International University, Erbil, Iraq Find articles by Hussaini Bala 1 Author information Copyright and License information 1 Accounting, Tishk International University, Erbil, Iraq Competing interests: The authors declare that they have no conflict of interest PMC Copyright notice Responses to Reviewers Submission ID: 167892 #TrackingId:24443388 Dear Respected Reviewers Thank you so much for the time you have put into examining this manuscript and doing a constructive review. Your comments have helped us correct all the noted errors and bring clarity to this work. We truly appreciate it. For clarity and ease of understanding, the revisions that we have made are all highlighted using RED text in the revised paper. Also, line numbers are included in the margin of the revised paper to easily locate the revisions made. Based on your comments, the following improvements have been made with supporting references. Thank you for your time and consideration. Reviewer 1# Comments: S/No Reviewers Comments Action/response from Authors 1 The main findings suggest that stronger corporate governance is associated with lower dividend payouts, that governance positively influences CSR engagement, and that CSR partially mediates the governance–dividend relationship. Overall, the study offers a solid empirical analysis using a large dataset. However, several conceptual and interpretive issues limit the manuscript’s scientific robustness in its current form. Response: We would like to sincerely thank the reviewer for his constructive evaluation and acknowledgment of the empirical contribution of the manuscript. We appreciate the positive acknowledgment that the manuscript provides a solid empirical analysis based on a large dataset and that it identifies important relationships among corporate governance, CSR, and dividend policy. With respect to the concern of the reviewer about the manuscript’s conceptual and interpretive aspects, we have carefully reviewed the manuscript and made some improvements to strengthen its scientific robustness. First, the manuscript’s conceptual framework has been further clarified to better articulate the theoretical mechanisms between corporate governance and dividend policy through CSR engagement. In particular, the manuscript’s interpretation of the theoretical framework now more clearly integrates agency theory and stakeholder theory to better explain how good corporate governance might encourage companies to invest in sustainability initiatives instead of dividend payments. Second, we have expanded the interpretation of the empirical findings to better explain the identified relationship between corporate governance and dividend policy through CSR engagement. In particular, the manuscript’s interpretation of the empirical findings now more clearly discusses why good corporate governance might be related to lower dividend payments and how CSR investments might be an alternative channel for value creation and long-term stakeholder engagement. See the revised introduction, literature review, methodology, results and discussion, and conclusion and implication sections as highlighted in red. 2 The manuscript makes an incremental contribution by explicitly modeling CSR as a mediating mechanism between governance and dividend policy in an emerging market setting. While the topic is relevant and of interest to the journal’s readership, the originality lies more in the empirical configuration than in theoretical development. The contribution would be stronger if the authors more clearly positioned their work within broader debates on CSR and sustainability governance, rather than relying predominantly on an instrumental, agency-based interpretation of CSR. Response: We appreciate the reviewer for his helpful suggestion. In response to this, we have revised the contribution in the introduction to more clearly position the study within broader debates on CSR and sustainability governance. See the revised introduction as highlighted in red. 3 Methodology and Validity The empirical methodology is generally appropriate. The use of panel data, fixed-effects estimation, and standard control variables is consistent with accepted practice in this field. Tables and results are clearly presented, and the analysis appears internally consistent. That said, the study implicitly assumes that higher CSR scores reflect stronger ethical or sustainability-oriented governance. This assumption is not sufficiently discussed or justified, particularly given that CSR scores may capture disclosure intensity or legitimacy-seeking behavior rather than substantive social or environmental impact. Suggestion: The authors should more explicitly acknowledge the limitations of CSR scores as proxies for sustainability or ethical performance and clarify that the analysis primarily captures financial governance behavior. Response: We thank the reviewer for this valuable comments. In response to this suggestion, we have added a clarification in the methodology admitting the limitations of CSR scores as proxies for substantive sustainability or ethical performance. See the revised methodology as highlighted in red. 4 Interpretation of Results and Conclusions The interpretation of the empirical results occasionally goes beyond what the data can directly support. In particular, the discussion suggests that firms are prioritizing social responsibility over shareholder payouts, which introduces a normative interpretation that is not directly evidenced by the analysis. Suggestion: The conclusions should be more cautiously framed, clearly distinguishing between observed financial allocation patterns and broader ethical or sustainability implications. Response: We thank reviewer for this valuable comment. In response to the comment, we have now revised the conclusions and limitation to clearly differentiate observed financial patterns from wider ethical or sustainability interpretations See the revised conclusion and implications as highlighted in red. 5 The manuscript is generally well written and clearly structured. The length is appropriate for the subject matter, and the tables and figures are helpful. Minor improvements in clarity could be achieved by tightening parts of the discussion section, particularly where interpretations become speculative. I did not identify major linguistic issues, although a light stylistic review could further improve clarity in some sections. Response: We appreciate the reviewer for the positive comments. We  have now tightened the introduction, literature review, methodology, results and discussion, conclusion and implication sections as highlighted in red. See the revised introduction, literature review, methodology,  results and discussion, conclusion and implication sections as highlighted in red. We believe the revisions we have made significantly enhance the clarity and depth of our analysis. Your invaluable input has greatly strengthened our work, and we are deeply grateful for your assistance. Thank you for your time and help. Best Regards, The Authors F1000Res. 2025 Oct 6. doi: 10.5256/f1000research.185036.r413711 Reviewer response for version 1 Noor Afza Amran Noor Afza Amran 1 Universiti Utara Malaysia, Sintok, Kedah, Malaysia Referee Find articles by Noor Afza Amran 1 Author information Copyright and License information 1 Universiti Utara Malaysia, Sintok, Kedah, Malaysia Competing interests: No competing interests were disclosed. Roles Noor Afza Amran : Referee Copyright: © 2025 Amran NA This is an open access peer review report distributed under the terms of the Creative Commons Attribution Licence, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. PMC Copyright notice The abstract has been discussed clearly and includes all the necessary items to be included in an Abstract. The problem statement clearly highlights the role of CSR in mediating CG and dividend payout.  This study adopts agency and stakeholder theories for application. The LR section is comprehensive and up-to-date. For the methodology section, the years of study from 2012 to 2021 are adequate. Using a secondary data approach. Sample of the 2012 China Securities Regulatory Commission (CSRC). For the CGI Index, we need to explain whether the Index is constructed by researchers or adopted from another source. If it is adopted/adapted from another source, please acknowledge in this section. If you developed the CGI, then you did not mention how you conducted validity and reliability tests of your construct. The validation of the construct needs to be explained clearly. Results and discussion are adequate. Is the work clearly and accurately presented and does it cite the current literature? Yes If applicable, is the statistical analysis and its interpretation appropriate? Yes Are all the source data underlying the results available to ensure full reproducibility? Yes Is the study design appropriate and is the work technically sound? Yes Are the conclusions drawn adequately supported by the results? Yes Are sufficient details of methods and analysis provided to allow replication by others? Partly Reviewer Expertise: Corporate governance, Auditing, Sustainability, Financial Reporting I confirm that I have read this submission and believe that I have an appropriate level of expertise to confirm that it is of an acceptable scientific standard. Associated Data This section collects any data citations, data availability statements, or supplementary materials included in this article. Data Citations Shaheen R, Bala H, Haruna Abubakar A, et al. : CSR DV RAW DATA (1) (1).ods. figshare.Dataset.2025. 10.6084/m9.figshare.29890247.v1 [ DOI ] Data Availability Statement The data used in this study is upload in repository at https://doi.org/10.6084/m9.figshare.29890247.v1 . 134 Also, CSR data were collected from the Hexun database. The data on all other variables, including CG and control variables, were collected from the China Stock Market and Accounting Research (CSMAR) database. The original data used in this study are accessible at https://data.csmar.com (CG and financial variables and at http://stockdata.stock.hexun.com/zrbg/Plate.aspx (For CSR score). The dataset has a CC-BY 4.0 license applied. 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