Revisiting Dividend Policy and Stock Market Reaction of Indonesian Manufacturing Enterprises amidst the COVID-19 Crisis: A Series of Robustness Checks

This study, which was prompted by the COVID-19 crisis, aims to assess the dividend policies of manufacturing firms, and examine market reactions to these corporate actions. A comprehensive evaluation of robustness was carried out, encompassing sub-period and sub-sample robustness checks, along with consistency testing for various key variable proxies. The effects of dividend announcements on the stock market were investigated across three time periods: 2019 to 2021. The main models indicate a positive dividend policy of manufacturing firms during the pandemic, revealing that the firms maintained or enhanced dividends amidst the pandemic, which was consistent in all sub-period check estimations. Conversely, distinct findings are observed within the Basic and Chemical industry sectors, while the Consumer Goods and Miscellaneous industries align with this study's results. The study also demonstrates the relevance of the findings to dividend signaling theory but not to the pecking order theory. Furthermore, the market reactions to dividend announcements during the 2020 crisis were strong and positive, in contrast to the weaker sensitivity observed in 2019 and 2021. This study bears significant implications for the crisis-time dividend policies for firms, implying that corporations should exhibit heightened responsiveness during such periods to transmit a positive signal to the market amid sluggish stock market activity.