As corporate social responsibility (CSR) is a popular topic, many studies have been investigating the connection between CSR and the nature of corporate finance, such as capital structure and cost of debt, asymmetric information, investment efficiency and dividend payout. However, there are not many studies capturing the relationship between CSR and share repurchase – which is a new global tool of payout policy. On the other hand, most of the studies focus on the US market. Thus, the literature on the relationship between CSR and share repurchase is quite limited in the European market.
Therefore, this thesis aims to investigate the impact of CSR performance on share repurchase payouts of listed companies in the STOXX Europe total market index (STOXX Europe TMI). Firstly, the outcomes of this thesis can give general information on whether responsible companies are acting responsibly when using share repurchase as a payout channel or not. Secondly, stakeholders and policymakers can have a better view of the motives behind the share repurchase activities of responsible companies.
The motivation between CSR performance and share repurchase payouts is developed based on life cycle theory, agency theory, signaling theory and stakeholder theory. Besides the independent variable - CSR performance which is represented by ESG score and ESG components, the research is also joined by five control variables namely, cash holding, profitability, growth opportunity, leverage ratio and company size to analyze the dependent variable – share repurchase payout. The dataset includes 2 578 observations from 523 listed companies in STOXX Europe TMI over the period from 2006 to 2019.
The regression results reveal that there is a positive and significant relationship between CSR per-formance (total ESG score) and share repurchase payout. Nevertheless, the impact on the share repurchase payout of each ESG component is not the same. The positive relationship is mainly driven by the social and governance dimension. Specifically, the governance dimension has the greatest impact on share repurchase payout
