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The Effects of Cash Dividend on Stock Prices during the COVID-19 Pandemic: Evidence from Poland

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  • Pawel Sekula
  • Blazej Socha

Abstract

Purpose: The aim of the study was to examine investors' reactions to planned dividends and assess the short-term behaviour of stock prices before ex-dividend. In our paper we have adopted the following research hypothesis: The buying pressure from traders causes order imbalances and positive abnormal returns in the cum-dividend period in COVID-19 reality. Design/Methodology/Approach: Using event-study methodology we investigated the stock market reaction to dividend payment in 2020 (first pandemic year) at Warsaw Stock Exchange, Poland. The research sample consisted of 132 dividends payments. The event day was the last cum-dividend day (session day before ex-dividend) and the event periods were comprised of 16, 11, 6, 4 and 3 days. Findings: Our findings indicate that in COVID-19 reality buying pressure caused positive abnormal returns in the cum-dividend period in short term 16, 11, 6, 4 and 3 day event windows. Practical Implications: The conclusions obtained can guide investors in developing investment strategies during financial crises. Originality/Value: The main contributions of the study are the evidence in the discussion of the impact of cash dividends in the COVID-19 pandemic and the results of capital markets information efficiency tests. The research and conclusions extend the existing knowledge on the response to dividend payments during periods of financial crises. The article extends research on dividends in the Polish capital market.

Suggested Citation

  • Pawel Sekula & Blazej Socha, 2022. "The Effects of Cash Dividend on Stock Prices during the COVID-19 Pandemic: Evidence from Poland," European Research Studies Journal, European Research Studies Journal, vol. 0(3), pages 145-155.
    • Handle: RePEc:ers:journl:v:xxv:y:2022:i:3:p:145-155
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy

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