Open Access
Article
SciPap-1773
Revisiting Dividend Policy and Stock Market Reaction of Indonesian Manufacturing Enterprises amidst the COVID-19 Crisis: A Series of Robustness Checks
1 Department of Management, Sekolah Tinggi Ilmu Ekonomi Ciputra Makassar, Kawasan CitraLand City CPI, Jalan Sunset Boulevard, Kota Makassar, Sulawesi Selatan, Makassar 90224, Indonesia
2 Management, Satya Wacana Christian University, 52-60 Diponegoro Street, Salatiga 50711, Indonesia
3 Statistics, Hasanuddin University, KM 10 Perintis Kemerdekaan Street, Makassar 90245, Indonesia
4 Accounting, Universitas Indonesia, Kampus Universitas Indonesia, Depok 16424, Indonesia
5 Sharia Economics Law, Alauddin State Islamic University, 36. H. M. Yasin Limpo Street, Gowa 92118, Indonesia
6 Applied English Linguistics, Universitas Katolik Indonesia Atma Jaya, 51 Jenderal Sudirman Street, South Jakarta 12930, Indonesia
* Authors to whom correspondence should be addressed.
Abstract: This study, which was prompted by the COVID-19 crisis, aims to assess the dividend policies of manufacturing firms, and examine market reactions to these corporate actions. A comprehensive evaluation of robustness was carried out, encompassing sub-period and sub-sample robustness checks, along with consistency testing for various key variable proxies. The effects of dividend announcements on the stock market were investigated across three time periods: 2019 to 2021. The main models indicate a positive dividend policy of manufacturing firms during the pandemic, revealing that the firms maintained or enhanced dividends amidst the pandemic, which was consistent in all sub-period check estimations. Conversely, distinct findings are observed within the Basic and Chemical industry sectors, while the Consumer Goods and Miscellaneous industries align with this study's results. The study also demonstrates the relevance of the findings to dividend signaling theory but not to the pecking order theory. Furthermore, the market reactions to dividend announcements during the 2020 crisis were strong and positive, in contrast to the weaker sensitivity observed in 2019 and 2021. This study bears significant implications for the crisis-time dividend policies for firms, implying that corporations should exhibit heightened responsiveness during such periods to transmit a positive signal to the market amid sluggish stock market activity.
Keywords: Crisis, Covid-19, Dividend Policy, Stock Market Reaction, Manufacturing Companies
JEL classification: C33 - Panel Data Models • Spatio-temporal Models, G01 - Financial Crises, G35 - Payout Policy
Received: 11 September 2023 / Accepted: 15 April 2024 / Published: 1 May 2024
