ABSTRACT
Drawn on signalling theory, this paper investigates the impact of uncertainty caused by COVID-19 on corporate dividend policy. Using data from Chinese listed companies, the empirical results document a negative relationship between the COVID-19 crisis and corporate cash dividend payments. Moreover, the negative association between COVID-19 and cash dividend is more pronounced in large-scale firms and state-owned enterprises (SOEs). These findings imply that, compared with large-scale firms and SOEs, the competitive position of small enterprises and non-SOEs are more fragile and thus more dependent on cash dividends to release positive signals to outsiders, so as to deal with the uncertainty caused by COVID-19. In further analysis, this study also finds that those industries related to transportation and entertainment have a negative effect during the epidemic, and they are more likely to cut dividends to assure additional cash and flexibility.
Disclosure statement
No potential conflict of interest was reported by the author(s).
Notes
1 The COVID-19 crisis occurred at the end of 2019, and every firm must disclose their financial statement within 4 months after the end of fiscal year in China, and then they make an implementation of dividend policy since firms’ managers are supposed to make a dividends decision relying on their revenue. Consequently, the COVID-19 epidemic affects the corporations’ dividend policy in 2019.
2 According to China Securities Regulatory Commission in 2012, industry code G represents ‘Transportation, warehousing and postal services’. Industry code H and R describe ‘Accommodation and catering’ and ‘Culture, sport and entertainment’ respectively.