Exploring Dividend Policy Effects on Corporate Reputation and Product Responsibility in the German Market

ABSTRACT Germany has robust product responsibility legislation that mandates corporations to ensure the safety and quality of their products. Companies in Germany operate in a tightly regulated and fiercely competitive market, where sustained success depends on maintaining product quality and a strong reputation. This study used dividend signaling theory to examine the influence of dividend policy decisions on product responsibility and corporate reputation. An inclusion criterion was established to select non‐financial companies, and a purposive sampling technique was employed to gather data from 227 non‐financial companies listed on the Frankfurt Stock Exchange between 2006 and 2023, sourced from the Thomson Reuters Eikon DataStream. The Augmented Mean Group (AMG) estimator, Common Correlated Effects Mean Group (CCEMG) estimator, and the two‐step Generalized Method of Moments (GMM) were used to estimate the relationships among the variables under study. The findings indicated that dividend yield has a negative and significant impact on product responsibility, while it positively influences corporate reputation. Additionally, dividend payout was found to have a negative, significant relationship with product responsibility and a positive, significant impact on corporate reputation. In contrast, the dividend coverage ratio demonstrated a positive and significant impact on product responsibility and corporate reputation. The moderating relationship between governance and dividend yield also significantly affected product responsibility and corporate reputation. Corporations should implement a strategic dividend program to enhance their brand and establish product responsibility. Highlighting a stable, attractive dividend policy can signal financial well‐being and a commitment to enhancing shareholder value, making it an effective strategy for cultivating investor confidence.