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This study investigates the relationship between environmental, social, and governance (ESG) scores and dividend policies, considering the moderating role of audit quality. Based on data for Western European listed companies (leaders in ESG revolution) over the period 2010–2019, panel regression analyses show a significant positive relationship between ESG and dividend payouts. Thus, companies with strong ESG practices prove their stakeholders' and shareholders' orientation, maintaining their dividend payments. However, involvement in high-quality ESG practices slows dividend growth. Audit quality has also a negative moderating effect on ESG–dividend links, prevalent at the firms whose financial audit is conducted by Big Four auditors, with no statistically significant results for ESG assurance quality. The findings are robust to sensitivity analyses based on alternative measures and estimation techniques. These results have implications for investors, management, analysts, and policy makers, providing significant lessons for companies and markets concerned about extending their ESG policies.

Due to increasing pressure from stakeholders, managers face many hurdles in transforming their businesses to advance corporate sustainability. This study explores the relationship between the ability of so-called “change agents for sustainability” with sustainability performance (SP), particularly in the challenging environment of financing constraints. This study also reveals the mechanism by which competent managers alleviate financial constraints in firms. The panel data estimation method is used on a dataset of 4132 Chinese firms from 2010 to 2019. Empirical results reveal that CEO management ability is positively related to SP. Furthermore, the findings contend that competent CEOs alleviate financing constraints in Chinese firms by improving their SP. Moreover, the competent CEOs in financially constrained firms focus more on sustainability than competent CEOs in non-financially constrained firms. The results are robust for alternative estimation techniques. In light of the study's conclusion, the implications and recommendations are also illustrated.

The study explores the moderating role of audit quality in the relationship between environmental, social, and governance (ESG) factors and corporate financial performance (CFP) in Western European countries. The research sample includes 620 firms headquartered in Western Europe, including Austria, Belgium, France, Germany, Luxembourg, Monaco, the Netherlands, and Switzerland from 2010 to 2019. Panel data estimations are used to examine the direct and moderating effects. The results show that ESG has a significantly negative effect on a firm's financial performance as measured by the return on assets (ROA), supporting the trade-off hypothesis in which investing in ESG activities increases the cost of business. Additionally, we find that ESG's adverse influence on CFP is more evident at enterprises that are certified by Big Four accounting firms. However, ESG has a significantly positive effect on revenue, suggesting that customers are more attracted to firms that invest in ESG. The analysis of the subcomponents of ESG supports the main results. The results are robust to alternative model specifications and alternative measures of CFP and audit quality and are free of endogeneity issues. The findings contribute to the existing knowledge on ESG by elucidating the effect of external auditor quality on the ESG-CFP relationship. We also examine overall ESG scores as well as individual ESG characteristics (environmental, social, and governance).