Government responses to COVID-19 and market reactions to dividend announcements in ASEAN-5 countries

Rizky Yudaruddin · Dadang Lesmana · Rozaimah Zainudin

10 citations0/0 files storedAsian Journal of Accounting Research

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Corporate Finance and Governance Financial Markets and Investment Strategies COVID-19 Pandemic Impacts

Abstract

Purpose This study aimed to thoroughly examine the impact of government responses to the COVID-19 pandemic on market reactions to company dividend announcements in the Association of Southeast Asian Nations (ASEAN) countries. It also explored how these government responses influenced market reactions based on country-specific factors, dividend types and company characteristics. Design/methodology/approach In order to achieve the stated objectives, the event study method was adopted for this investigation using 5,648 dividend announcements made by various companies listed in 5 ASEAN countries from 2020 to 2022 to assess market reactions. Additionally, regression analysis with robust standard errors was conducted to examine the impact of government responses to COVID-19 on these market reactions. Findings The results showed that government responses to COVID-19 negatively affected market reactions to dividend announcements across the five explored ASEAN countries, with the strongest impact in Thailand and Indonesia. Investors in these countries were observed to be more concerned about the pandemic and strict policies such as lockdowns. This is particularly evident in dividend decreases and no-change announcements, as investors viewed stringent measures as signs of economic uncertainty, thereby reducing confidence in company stability. Accordingly, firm-level analysis showed that large, highly profitable and low-leverage companies experience stronger negative reactions, emphasizing the varying sensitivity of companies to government interventions. Originality/value The current study is the first to provide novel insights into government responses with the aim of determining the effectiveness of dividend announcements to market reactions during COVID-19 among companies in ASEAN countries.

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1970EFFICIENT CAPITAL MARKETS: A REVIEW OF THEORY AND EMPIRICAL WORK*1985Dividends, Dilution, and Taxes: A Signalling Equilibrium 2020Stock markets’ reaction to COVID-19: Cases or fatalities?2020COVID–19’s Impact on Stock Prices Across Different Sectors—An Event Study Based on the Chinese Stock Market 2020Infected Markets: Novel Coronavirus, Government Interventions, and Stock Return Volatility around the Globe 2020COVID-19 lockdowns, stimulus packages, travel bans, and stock returns 2020Market reactions to the arrival and containment of COVID-19: An event study 2020Event study on the reaction of the developed and emerging stock markets to the 2019-nCoV outbreak

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