The impact of covid-19 pandemic on corporate dividend policy and stock market reaction: empirical evidence in vietnam companies

Abstract

This study aims to examine the impact of the COVID-19 crisis on the dividend policy of Vietnamese non-financial companies listed on the Ho Chi Minh City Stock Exchange (HOSE) and stock market reaction to this action by companies between the first quarter of 2018 and the last quarter of 2021. Purposeful sampling technique was used to select 62 Construction & Real estate, 22 Transportation & Warehousing, 12 Retail companies to examine the impact of the pandemic on dividend policy from 2018 to 2021, as well as the stock market reaction to their dividend announcement. Data analyzed using dynamic panel data regression with the SYS-GMM estimation method, as well as testing a sample with the best remedial effect as well as solving the endogenous problem. The findings demonstrate that during the COVID-19 pandemic, companies developed a negative dividend policy. Nonetheless, the stock market’s response to the company’s move in 2020 was positive, indicating that investors remain optimism and expectations for the market in time of crisis. As a result, companies should adopt strategic initiatives or other management strategies to alleviate capital market stagnation during crises as well as appropriate strategies when responding positively. Furthermore, in the models of FEM, REM, GLS, FEM D&K, and SYS-GMM, Investment Opportunity and Financial Leverage have the same influence to dividend policy, which strongly confirms the direction of impact but is not appropriate with the expected hypothesis. Furthermore, Profitability and Past dividend has a substantially positive impact to the dividend policy, which support the given hypotheses. Based on Pecking order theory, Signaling theory and agency theory, this result is completely consistent. In addition, this study is also suitable as a reference for investors to obtain optimal profits from the companies under a new phase after the pandemic.