Exploring the relationship between dividend policy, the COVID-19 crisis, and stock market reaction: empirical insights from Indonesian real estate and property firms

The economic turbulence experienced during the COVID-19 crisis in Indonesia in 2020 provides a backdrop for this study, which aims to investigate the relationship between the crisis and dividend policies within the real estate and property sectors in Indonesia, along with the stock market’s response to corporate announcements. The examination involves multiple robustness tests, including the incorporation of various proxy measures for the primary variables augmented with control variables to fortify the model, as well as a sub-period robustness check to assess the relationship between the crisis and dividend policies, and market reactions. The findings of this research indicate that companies tended to adopt a negative dividend policy during times of crisis. The sub-period robustness check consistently reveals that dividend policies are positively correlated with macroeconomic conditions, a pattern also observed in the pre-crisis period. The statistical analysis tools used are dynamic panel data regression for testing the causality of crisis and dividend policy, and also one-sample T-test for testing stock market reaction. Furthermore, the results suggest a positive market response to dividend announcements during the 2020 crisis. A comparison with the pre-crisis year 2019 and the post-crisis year 2021 indicates that these comparative periods did not exhibit a similar positive reaction as observed during the crisis. Consequently, this study offers implications for real estate and property sector companies in Indonesia to consider adopting negative dividend policy to maintain the company’s survival amidst a crisis full of uncertainty.