The baseline regression results confirm that the relationship between dividend payments and corporate green innovation is inverted U-shaped. Reasonable dividend payments can effectively promote green innovation, while excessive dividend payments significantly reduce green innovation. Combining the theoretical analysis of dividend payments on corporate green innovation in the previous section, mechanism testing can be conducted from the perspectives of signal transmission effects, agency costs, and green innovation willingness.
When dividend payments are at a low level, they can send positive signals to the outside world, reduce financing constraints, decrease agency costs, and provide financial support for green innovation. Moderate dividend payouts can also generate incentive effects, enhance human capital and management’s environmental awareness, increase willingness for green innovation, and promote green innovation. When companies engage in “excessive dividend payouts,” shareholders may exhibit dividend tunneling behavior, negative signals leading to increased financing costs and higher agency costs. Dividend tunneling behavior can also result in loss of human capital, increased risks of failure in green innovation, decreased willingness for innovation among management, and ultimately inhibit green innovation. This study examines the impact paths and mechanisms of dividend payments on green innovation based on the above logic. Since the effects of the above mechanisms may vary in different scales of dividend payments, this paper divides the full sample into two sub-samples, the low dividend group and high dividend group, based on the mean dividend payment, and sets the regression model as follows:
In order to alleviate the endogeneity issue caused by mutual causality, the instrumental variable is set as t + 1 period. Mi,t+1 represents the instrumental variable of company i in year t + 1. Other indicators are defined similarly as in Equation (2).
5.5.1. Mechanism Examination Based on Agency Costs
Reviewing the theoretical analysis of dividend payments on corporate green innovation in the preceding text, we find that dividend payments are closely related to agency costs. The first type of agency costs manifest as management extracting private benefits through on-the-job consumption, leading to agency conflicts with shareholders. The second type of agency costs manifest as controlling shareholders obtaining private benefits through fund appropriation, related-party transactions, etc., resulting in agency conflicts with minority shareholders. Referring to Luo et al. [
68], the first type of agency costs is measured by on-the-job consumption (
AC), with the formula as follows: on-the-job consumption = (office expenses + travel expenses + communication expenses + entertainment expenses + overseas training expenses + car expenses + meeting expenses)/operating income. Referring to Bian et al. [
22], the second type of agency costs is measured by related-party transactions (
RPT), with the formula as follows: related-party transactions = total amount of related-party transactions/total assets.
The examination of the mechanism of dividend payments on agency costs is shown in
Table 8. The coefficients of the low dividend group (
DIV) in columns (1) and (2) of the regression results on in-service consumption are significantly negative, indicating that when dividend payments are at a lower level, increasing dividend payments can effectively constrain executives’ self-interest behavior, leading to a decrease in in-service consumption. The coefficients of the high dividend group (
DIV) are significantly positive, indicating that the higher the excess dividend payments, the more severe the wealth transfer behavior of shareholders, the lower the level of corporate governance, and the more it helps to boost executives’ self-interested behavior, leading to an increase in in-service consumption.
The results of the regression analysis on dividend payments and related party transactions are presented in columns (3) and (4) of
Table 8. The coefficients for the low dividend group
DIV are all significantly negative, while the coefficients for the high dividend group
DIV are not significant. This indicates that when dividend payments are at a low level, increasing dividend payments can effectively limit the size of related party transactions, reduce the interests of controlling shareholders in expropriating minority shareholders, and decrease agency costs. When dividend payments are excessive, they no longer have a significant impact on related party transactions within the firm. This may be because shareholders directly extract internal funds through dividend tunneling behavior, eliminating the need for indirect methods such as related party transactions.
In summary, moderate dividend payments can significantly reduce in-service consumption, related transactions, and suppress agency costs. Excessive dividend payments, on the other hand, significantly increase on-the-job consumption and the first type of agency costs rise. Combined with the existing literature confirming that agency costs adversely affect corporate green innovation [
32,
33], this subsection verifies that dividend payments affect green innovation persistence through agency costs, verifying Hypothesis 1b. Specifically, moderate dividend payouts reduce Type I and Type II agency costs, which in turn promote green innovation persistence. Excessive dividend payouts, on the other hand, cause dividend tunneling effects and increase agency costs, which in turn inhibit green innovation persistence.
5.5.2. Mechanism Examination Based on Knowledge Management
Based on knowledge management theory, knowledge management capability can be defined as the creation, acquisition, integration, use, and dissemination of knowledge resources by organizations [
69]. Intellectual capital is an important prerequisite for companies to exploit their knowledge management capabilities, and the stability of the stock and structure of intellectual capital can, to a certain extent, determine the creation ability and use efficiency of knowledge resources [
70]. At the same time, the degree of environmental awareness, the breadth of green knowledge, and the innovation awareness of enterprises represent the enterprise’s ability in green knowledge management and technical knowledge management. Therefore, this article chooses the five indicators of intellectual capital stock, stability of intellectual capital structure, environmental awareness, the breadth of green knowledge, and innovation awareness as the proxy variables for knowledge management ability to more comprehensively investigate the mechanism of knowledge management ability.
According to Yue [
48], intellectual capital is measured by the ratio of the sum of master’s and doctoral staff to total staff (
IC).
Table 9 presents the regression results of dividend payments on intellectual capital in columns (1) and (2). The coefficient for the low dividend group (
DIV) is not significant, while the coefficient for the high dividend group (
DIV) is significantly negative. This suggests that moderate dividend payouts have less impact on intellectual capital. On the other hand, companies that pay excessive dividends lead to a decline in the proportion of highly qualified workers and a greater loss of intellectual capital.
Referring to Cao and Yu [
34], model (6) is used to measure the structural stability of intellectual capital (
SIC), as follows:
In the above equation, Et and Et+1 are the total number of master’s and doctoral employees in year t and year t + 1; #(St/St+1) is the number of the company’s highly qualified employees who are in the job in year t, but leave the job in year t + 1; and #(St+1/St) is the number of highly qualified employees of the company who are new to the job in year t + 1. The larger the value of SIC, the more stable the structure of intellectual capital.
Columns (3) and (4) of
Table 9 show the results of the regression analysis linking dividend payouts to the robustness of the intellectual capital framework. It is noteworthy that the
DIV variable has a significantly positive correlation in the group with lower dividend payouts, while in the group with higher dividend payouts, the
DIV coefficient is significantly negative. This suggests that a balanced dividend policy can strengthen the structural integrity of intellectual capital and harness the motivational potential of such a policy. Conversely, companies that overpay dividends tend to undermine the structural soundness of intellectual capital and impair their knowledge management capabilities.
According to Gadenne et al. [
42], the environmental awareness (
EA) of enterprises was measured using content analysis. If relevant indicators (the eight relevant indicators of executive environmental awareness include environmental concepts, environmental goals, environmental management system, environmental education and training, environmental special actions, environmental emergency response mechanisms, environmental honors or awards, and the system of “simultaneous design, construction, and operation of environmental protection facilities and main projects”) were disclosed in the annual reports or corporate social responsibility reports of listed companies, they were assigned a value of 1, otherwise 0. The environmental awareness was the sum of all indicator scores, which were then normalized. The regression results of dividend payments on executive environmental awareness are shown in columns (1) and (2) of
Table 10. The coefficient of the low dividend group (
DIV) is significantly positive, while the coefficient of the high dividend group (
DIV) is significantly negative. This indicates that moderate dividend payments can motivate executives to strengthen the green culture of the firm and increase their environmental awareness, but excessive dividend payments lead to a decrease in environmental awareness.
Drawing on Wang’s [
35] measurement of knowledge breadth, the following formula is used to measure the green knowledge breadth (
GKB) of an enterprise based on the IPC (International Patent Classification) main classification number of green patent applications in China:
where
Zimt is the cumulative number of green patent applications (including green invention and green utility model patents) in IPC’s m major groups for firm i up to year t and
Zit is the cumulative number of green patent applications for firm i up to year t. The larger the
GKB, the larger the green knowledge breadth of the firm.
Columns (3) and (4) of
Table 10 present the results of the regression of dividend payment on breadth of green knowledge. The coefficient of the low dividend group (
DIV) is significantly positive, while the coefficient of the high dividend group (
DIV) is not significant. This suggests that moderate dividend payouts can increase the breadth of companies’ green knowledge and improve the ability to create and use green technological knowledge. This means that knowledge management skills are improved, which in turn promotes the persistence of green innovations. On the other hand, excessive dividend payments have less impact on the breadth of green knowledge.
Drawing on the research of Chen [
71], text analysis was used to calculate the total number of keywords including “R&D” and “innovation” in the Management Discussion and Analysis (MD&A) sections of the companies’ annual reports that reflect the executives’ sense of innovation. The natural logarithm of this total number of words is then used to measure executive innovation awareness (
IA). Columns (5) and (6) of
Table 10 show the regression results of dividend payments on executive innovation awareness. The coefficient of
DIV is significantly positive for the low dividend payout group and significantly negative for the high dividend payout group. It indicates that moderate dividend payout can motivate executives to increase their innovation awareness, but excessive dividend payout leads to a decrease in the innovation awareness of executives.
In summary, moderate dividend payment can significantly improve the structural stability of intellectual capital, increase environmental awareness, the breadth of green knowledge and innovation awareness of enterprises, and comprehensively improve the knowledge management ability of enterprises. Moderate dividend payments can play an effective role in creating incentives for shareholders and R&D personnel to promote the persistence of green innovation by improving knowledge management capabilities. An excessive dividend payment, on the other hand, reduces the stock of intellectual capital and structural stability and weakens the environmental awareness and innovative strength of companies. Overpayment of dividends leads to the disappearance of the incentive effect of dividend payments and inhibits the persistence of green innovation by reducing knowledge management capabilities. In this subsection, the role of knowledge management capability in the expectation of mechanism transfer between dividend payments and persistence of green innovations is tested and Hypothesis 1b is confirmed.