Uncertainty as a determinant of dividend decisions of public companies during the COVID-19 pandemic. The case of companies listed on the Warsaw Stock Exchange

Abstract

The aim of the article is to analyze the impact of an unpredictable individual event such as the COVID-19 pandemic on dividend decisions of companies listed on the Warsaw Stock Exchange. Due to the fact that the vast majority of companies do not provide detailed justification for dividend decisions, the analysis was based on a panel probit model with random effects of dividend propensity in the years 1998-2019, which was used to develop forecasts of dividend payments in 2020. The difference between the forecast and the actual dividend decision made by companies in 2020 could be attributed to the uncertainty caused by the pandemic.

The analysis covered 152 domestic companies listed on the Warsaw Stock Exchange that paid dividends in 2019 and/or in 2020. The calculations showed that, being uncertain about the future macroeconomic situation and, consequently, about their own, some companies stopped systematic annual dividend payments or significantly reduced their level. The companies made such decisions despite the fact that the forecasts developed on the basis of the probit model, proposed in the paper, indicated that they should pay dividends in 2020, as indicated by their good economic and financial situation.