{"title":"How do stock markets react to dividend announcements during the COVID-19 pandemic? Evidence from the GCC markets","authors":"Jamal Ali Al-Khasawneh, Heba Ali, Ahmed Hassanein","doi":"10.1108/imefm-08-2023-0294","DOIUrl":null,"url":null,"abstract":"<h3>Purpose</h3>\n<p>This study aims to investigate how stock markets responded to corporate dividend policy changes during the COVID-19 pandemic in the Gulf Cooperation Council (GCC) countries. Likewise, it explores how efficiently market prices incorporate the news by examining the speed of stock price adjustment to various dividend announcements.</p><!--/ Abstract__block -->\n<h3>Design/methodology/approach</h3>\n<p>The sample includes 741 dividend announcements from 2017 to 2021 made by 326 firms listed in the stock markets of the GCC countries. A series of regression analyses examine how dividend announcements influence the market reaction during the COVID-19 pandemic, controlling for other well-documented firm characteristics.</p><!--/ Abstract__block -->\n<h3>Findings</h3>\n<p>This study reveals an adverse stock price reaction to all the dividend announcements in most GCC markets. The findings also show strong asymmetric effects of COVID-19 on how the markets react to different dividend changes. Likewise, the authors show that investors tend to underreact to the good news of dividend increases amid hard times of crises due to prevailing uncertainty and bearish sentiment. Besides, regression results reveal that firms with dividend reductions during the pandemic experience less adverse market reactions than dividend-decreasing firms prepandemic.</p><!--/ Abstract__block -->\n<h3>Practical implications</h3>\n<p>For firms, the findings confirm the role that corporate dividend policy can play in conveying signals to investors, especially during hard times of crises and turbulences, thereby affecting their share price. For policymakers, the results substantially affect market efficiency and firm valuation in the GCC markets.</p><!--/ Abstract__block -->\n<h3>Originality/value</h3>\n<p>This study is not only one of the first few attempts to scrutinize how the pandemic has affected the market reaction to changes in corporate dividend policies but also, to the best of the authors’ knowledge, it is the first to examine how corporate dividend policy could affect stock markets during COVID-19 in the context of GCC markets.</p><!--/ Abstract__block -->","PeriodicalId":47091,"journal":{"name":"International Journal of Islamic and Middle Eastern Finance and Management","volume":"1 1","pages":""},"PeriodicalIF":2.8000,"publicationDate":"2024-07-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"International Journal of Islamic and Middle Eastern Finance and Management","FirstCategoryId":"96","ListUrlMain":"https://doi.org/10.1108/imefm-08-2023-0294","RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q2","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0
Abstract
Purpose
This study aims to investigate how stock markets responded to corporate dividend policy changes during the COVID-19 pandemic in the Gulf Cooperation Council (GCC) countries. Likewise, it explores how efficiently market prices incorporate the news by examining the speed of stock price adjustment to various dividend announcements.
Design/methodology/approach
The sample includes 741 dividend announcements from 2017 to 2021 made by 326 firms listed in the stock markets of the GCC countries. A series of regression analyses examine how dividend announcements influence the market reaction during the COVID-19 pandemic, controlling for other well-documented firm characteristics.
Findings
This study reveals an adverse stock price reaction to all the dividend announcements in most GCC markets. The findings also show strong asymmetric effects of COVID-19 on how the markets react to different dividend changes. Likewise, the authors show that investors tend to underreact to the good news of dividend increases amid hard times of crises due to prevailing uncertainty and bearish sentiment. Besides, regression results reveal that firms with dividend reductions during the pandemic experience less adverse market reactions than dividend-decreasing firms prepandemic.
Practical implications
For firms, the findings confirm the role that corporate dividend policy can play in conveying signals to investors, especially during hard times of crises and turbulences, thereby affecting their share price. For policymakers, the results substantially affect market efficiency and firm valuation in the GCC markets.
Originality/value
This study is not only one of the first few attempts to scrutinize how the pandemic has affected the market reaction to changes in corporate dividend policies but also, to the best of the authors’ knowledge, it is the first to examine how corporate dividend policy could affect stock markets during COVID-19 in the context of GCC markets.
期刊介绍:
The International Journal of Islamic and Middle Eastern Finance and Management (IMEFM) publishes quality and in-depth analysis on current issues within Islamic and Middle Eastern finance and management. The journal welcomes strong evidence-based empirical studies and results-focused case studies that share research in product development and clarify best practices. The title is also keen to consider work from emerging authors. IMEFM has just also accepted into Clarivate''s SSCI in 2018, and its IF will be available in summer 2019, with citations dating from 2016. The coverage includes but is not limited to: -Islamic finance: Fundamentals, trends and opportunities in Islamic Finance, Islamic banking and financial markets, Risk management, Corporate finance, Investment strategy, Islamic social finance, Financial planning, Housing finance, Legal and regulatory issues, -Islamic management: Corporate governance, Customer relationship management and service quality, Business ethics and corporate social responsibility, Management styles and strategies in Shariah environments, Labour and welfare economics, Political economy. The journal is the only title aiming to give an interdisciplinary and holistic view on Islamic finance and business management practices in order to inform these two intertwined communities.