Impacts of corporate announcements on stock returns during the global pandemic: evidence from the Indian stock market

Abstract

PurposeThe authors examine the impacts of corporate announcements on stock returns during the pandemic stress.Design/methodology/approachThe authors employ the event study methodology with the market model on a sample of 90 events (announcement and ex-date).FindingsThe authors find that all the corporate announcements do not impact the stock returns in a similar pattern. While the bonus announcement, ex-bonus and ex-split events led to positive significant abnormal returns on the event date, the rights issue and stock-split announcements failed to influence the stock returns. The findings suggest that before making such announcements, the corporates should wait until the market recovers because even the positively impacting events result in negative market responses during pandemic stress.Practical implicationsThis study will guide the policymakers to stimulate share prices during such pandemics with the help of various corporate announcements. The investors will be assisted in understanding the stock market mechanism and making wise decisions before reacting to corporate actions during a pandemic or emergency period. While the policymakers are concerned with influencing the share prices, the investors are concerned with the composition of the risk-return parameters in their portfolio. This study will act as an essential investment tool for both.Originality/valueTo the best of the authors’ knowledge, the authors conduct the first-ever study to examine the impacts of corporate announcements during a pandemic stress period that significantly contributes to the literature. The authors examine the announcement effects in India and accurately anticipate that this study will be a pioneer in this field. This study also paves the way for future researches in this area.

Market Reaction to Dividend Announcements Before and During COVID-19 - Evidence from Banking Sector

“…Prakash & L (2022) examined the reaction of stock to dividends announced during the pre-and postpandemic period and found that the market reaction around the dividend announcement was positive and significant compared to an early period. In another, study, Pandey et al, (2022) observed that only specific events, namely bonus announcement, ex-bonus and ex-split, led to positive and significant impact whereas, the market did not react to the announcement of the right issue and stock split. The study further observed that even positive events during a pandemic result in negative market reactions.…”

“…Corporate actions, namely dividends, bonuses, rights and stock-split announcements, are motivated towards influencing stock prices and have a significant impact on stock returns (Pandey et al, 2022). However, the extent of the impact varies significantly based on the timing of announcements, types of announcements and place of announcements.…”

“…Further, during the COVID crisis, studies concerning the market reaction to the dividend announcement have been conducted. In this regard, Pandey et al, (2022) and Prakash & L (2022) have studied the reaction of the Indian market and found varying results. Prakash & L (2022) found positive relationships between the pandemic and Abnormal returns, while Pandey et al, (2022) found that even positive events have a negative impact.…”

Pengaruh Faktor Fundamental Perusahaan Terhadap Return Saham

“…Hal ini karena terdapat asimetri informasi antara pihak perusahaan dengan pihak luar. Untuk mengurangi terjadinya asimetri informasi tersebut, maka perusahaan memberi sinyal kepada pihak luar, salah satunya seperti laporan keuangan tahunan (Pandey et al, 2022).…”

Comparative Study of Abnormal Return on Dividend Distribution in Companies in the Indonesia Stock Exchange

“…The reaction can be a positive reaction or a negative reaction. These positive reactions and negative reactions can be used as a basis to find out whether this supports the dividend signaling theory (Pandey et al, 2022).…”