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

PurposeThis 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/approachIn 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.FindingsThe 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/valueThe 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.