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The COVID-19 Pandemic and Corporate Dividend Policy

Published online by Cambridge University Press:  16 August 2021

Georg Cejnek ,
Otto Randl  and
Josef Zechner Open the ORCID record for Josef Zechner [Opens in a new window]
Georg Cejnek
Affiliation:
ZZ Vermögensverwaltung [email protected]
Otto Randl
Affiliation:
WU (Vienna University of Economics and Business) Department of Finance, Accounting, and Statistics
Josef Zechner*
Affiliation:
WU (Vienna University of Economics and Business) Department of Finance, Accounting, and Statistics
*
[email protected] (corresponding author)
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Abstract

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This article shows that, for major equity markets, the proportion of index values attributable to the first 5 years of dividends dropped substantially in the first quarter of 2020 and that this drop was not reversed by the end of the year. In the cross section, this breakdown of dividend smoothing due to COVID-19 was less severe for firms with higher operating cash flows and more positively coskewed stock returns, and it was more pronounced for those with higher leverage and in the financial sector. Heavy dividend cutters also experienced a substantial increase in exposure to systematic risk.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 56 , Issue 7: JFQA Symposium on the Consequences of the COVID-19 Pandemic for Firms and Capital Markets , November 2021 , pp. 2389 - 2410
Creative Commons
Creative Common License - CCCreative Common License - BY
This is an Open Access article, distributed under the terms of the Creative Commons Attribution licence (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted re-use, distribution, and reproduction in any medium, provided the original work is properly cited.
Copyright
© The Author(s), 2021. Published by Cambridge University Press on behalf of the Michael G. Foster School of Business, University of Washington

Footnotes

We thank Harry DeAngelo, Ran Duchin (editor), Andrei Gonçalves, Mark Grinblatt, Jarrad Harford (editor), Jonathan Karpoff, Alessandro Melone, Neal Stoughton, Jules van Binsbergen, Michael Weber, Alex Weissensteiner, Youchang Wu, and participants of the JFQA COVID-19 symposium for valuable comments. Miklós Verebélyi has provided excellent research assistance.

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