We find that dividend paying firms demonstrate superior corporate social responsibility (CSR) performance in the subsequent year than non-paying firms. This effect can be explained by stakeholder relationship management through CSR, as dividend payout reflects the inherent conflict between shareholders and stakeholders. Specifically, for dividend payers, we find an increase in CSR performance after states adopt constituency statutes which encourage board’s attention on stakeholders, supporting a causal inference of the stakeholder relationship management’s effect on CSR. The increase in dividend payers’ CSR around the constituency statute adoption is more pronounced when management is friendlier to CSR, which lends further support for the stakeholder relationship management channel. We find no support for the short-termism view of dividends or the notion that CSR is solely an outcome of agency problems within firms. In conclusion, our findings suggest that dividend payout serves as a mechanism for balancing shareholder and stakeholder interests, leading to improved CSR performance among dividend-paying firms.

We find that the tail risk of a firm's stock returns is positively affected by the tail risk of other firms held by the same common institutional blockholder (CIB). The CIB peer effect on tail risk increases (decreases) after exogenous initiations (terminations) of peer connections via CIB ownership, consistent with a causal interpretation. Our findings support the disclosure herding hypothesis, which predicts that firms release bad news after other firms’ bad news announcements. In addition, commonality in the real investment decisions of a firm and its CIB peers, along with the common trading pressure of these firms, contribute to the positive relationship between firms’ tail risk, highlighting the multifaceted roles of institutional investors in the contagion of firms’ tail risk. Finally, the CIB peer effect on tail risk is stronger when the CEO is more risk averse, CIBs hold more shares, or CIBs are pressure-sensitive (i.e., banks and insurance companies).