Dividend Suspensions and Cash Flows During the COVID-19 Pandemic: A Dynamic Econometric Model

Firms suspended dividend payments in unprecedented numbers in response to the outbreak of the Covid-19 pandemic. We develop a multivariate dynamic econometric model that allows dividend suspensions to affect the conditional mean, volatility, and jump probability of growth in daily industry-level dividends and demonstrate how the parameters of this model can be estimated using Bayesian Gibbs sampling methods. We find considerable heterogeneity across industries in the dynamics of daily dividend growth and the impact of dividend suspensions.

Keywords: COVID-19; high-frequency cash flows; dividend suspensions; predictive density modeling, Bayesian estimation

JEL Classification: C5, C11, G35

Suggested Citation: Suggested Citation

Pettenuzzo, Davide and Sabbatucci, Riccardo and Timmermann, Allan, Dividend Suspensions and Cash Flows During the COVID-19 Pandemic: A Dynamic Econometric Model (December 28, 2020). Swedish House of Finance Research Paper No. 20-18, Available at SSRN: https://ssrn.com/abstract=3628608 or http://dx.doi.org/10.2139/ssrn.3628608