The behavior of stock prices around the ex-day during a dividend shortage

Romain Ducret (), Nicolas Eugster, Dusan Isakov and Jean-Philippe Weisskopf ()
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Romain Ducret: University of Fribourg, Switzerland, Postal: Boulevard de Pérolles 90, 1700 Fribourg
Jean-Philippe Weisskopf: EHL Hospitality Business School

No 540, FSES Working Papers from Faculty of Economics and Social Sciences, University of Freiburg/Fribourg Switzerland

Abstract: This paper investigates the behavior of stock prices around ex-dividend dates in Europe over the period 2018-2022. In the early months of the COVID-19 pandemic in 2020, a significant fraction of firms cut, suspended, or reduced their dividend payments, leading to a shortage. Using a comprehensive sample of 14,844 dividend payments from 17 countries, we find that the magnitude of abnormal returns around the ex-dividend date is significantly larger during this period compared to normal times as dividend-seeking investors searched for the remaining payers. This pattern is amplified for high-yielding dividend stocks and in countries that temporarily imposed short-selling bans. Our results are consistent with a price-pressure hypothesis and challenge standard interpretations derived from an efficient market framework.

Keywords: dividend capture; price pressure; ex-dividend date; event study (search for similar items in EconPapers)
JEL-codes: G12 G14 G35 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2025-01-01
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