Covid-19 crisis and corporate cash dividend policies: evidence from Chinese listed companies

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.

KEYWORDS:

• Dividend policy
• COVID-19
• signal release
• uncertainty environment

JEL CLASSIFICATION:

• G32
• G35

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.

Additional information

Funding

This work was supported by the Chinese Natural Science Funds [Grant No. 71972017,71572019 and 72110107002], the Graduate Research and Innovation Foundation of Chongqing [Grant No. CYB21053], Fundamental Research Funds for the Central Universities [Grant No. 2019CDJSK02XK11] and the Chongqing Education Commission of Major Theoretical Research Project on Philosophy and Social Sciences [Grant No. 19SKZDZX11].