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Suspension of Insurers´ Dividends as a Response to the Covid-19 Crisis: Evidence from Equity Market

Author

Listed:
  • Petr Jakubik

    (European Insurance and Occupational Pensions Authority (EIOPA), Germany
    Charles University in Prague, Faculty of Social Sciences, Institute of Economic Studies, Czech Republic)

  • Saida Teleu

    (Maltese Financial Services Authority, Malta
    Charles University in Prague, Faculty of Social Sciences, Institute of Economic Studies, Czech Republic)

Abstract

The recent Covid-19 outbreak with significant increase of global uncertainties poses many challenges for financial sectors. Many supervisors took the measures aiming to safeguard resilience of financial institutions by requesting postponements any dividend distributions until uncertainties about further development will be reduced. In this respect, the European Insurance and Occupational Pensions Authority issued on Thursday 2nd April 2020 a statement requesting (re)insurers to suspend all discretionary dividend distributions and share buy backs aimed at remunerating shareholders. Although this should have a positive impact on the overall financial stability of the sector, it could also negatively influence insurers´ equity prices. Hence, this paper empirically investigates this potential effect using an event study methodology. Despite negative drops were observed in some cases, the obtained empirical results suggest that they were not statistically significant for the overall European insurers´ equity market when considering the event windows covering a few days after the statement was published.

Suggested Citation

  • Petr Jakubik & Saida Teleu, 2021. "Suspension of Insurers´ Dividends as a Response to the Covid-19 Crisis: Evidence from Equity Market," Working Papers IES 2021/05, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Mar 2021.
    • Handle: RePEc:fau:wpaper:wp2021_05
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    File URL: https://ies.fsv.cuni.cz/en/veda-vyzkum/working-papers/6398
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    More about this item

    Keywords

    European insurance sector; suspension of dividend distributions; event study; EIOPA statement; equity market;
    All these keywords.

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
    • G01 - Financial Economics - - General - - - Financial Crises

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