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Dividend Policy and the COVID-19 Crisis

Author

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  • Mazur, Mieszko
  • Dang, Man
  • Vo, Thuy Anh Thi

Abstract

This paper examines dividend payment behavior of the S&P1500 firms during the COVID-19 crisis characterized by the stock market crash and a V-shaped stock price recovery propelled by technology stocks. We find that the great majority of firms either maintain or increase the level of dividend payment during the crisis period. Yet, the relationship between the dividend payout and bottom-line earnings available to common shareholders is significantly negative. This relationship holds even for dividend-increasing firms whose earnings streams should be relatively higher (or increasing) compared to other firms in the sample. We also find that forecast earnings of up to one year in the future are negatively associated with the current dividend level implying that the existing payout policies are unsustainable. Interestingly, we document similar patterns for stock repurchases.

Suggested Citation

  • Mazur, Mieszko & Dang, Man & Vo, Thuy Anh Thi, 2020. "Dividend Policy and the COVID-19 Crisis," MPRA Paper 108765, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:108765
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    File URL: https://mpra.ub.uni-muenchen.de/108765/1/MPRA_paper_108765.pdf
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    References listed on IDEAS

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    Cited by:

    1. Ke, Yun, 2022. "The impact of COVID-19 on firms’ cost of equity capital: Early evidence from U.S. public firms," Finance Research Letters, Elsevier, vol. 46(PA).
    2. Burak Pirgaip, 2021. "Pan(dem)ic reactions in Turkish stock market: evidence from share repurchases," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 11(2), pages 381-402, June.
    3. Merchan Alvarez, Federico Alberto, 2023. "Export impact on dividend policy for big Colombian exporting firms, 2006-2014," Kiel Working Papers 2243, Kiel Institute for the World Economy (IfW Kiel).
    4. Ali, Heba, 2022. "Corporate dividend policy in the time of COVID-19: Evidence from the G-12 countries," Finance Research Letters, Elsevier, vol. 46(PB).

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    More about this item

    Keywords

    Dividend Policy; Dividend Yield; Share Repurchases; COVID-19;
    All these keywords.

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance

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