Revisiting dividend policy in Indonesian green investment firms and associated market reaction: an in-depth analysis over crises period

Abstract

The COVID-19 pandemic and its aftermath underscore the urgent need to examine the dividend policies of green investment firms in Indonesia, particularly their responses to economic uncertainty and their influence on stock market behavior. This study addresses a gap in the literature by exploring the dividend policies of SRI-KEHATI firms, Indonesia’s pioneering green investment companies, before, during, and after the COVID-19 crisis, as well as the market’s response to dividend announcements. Utilizing a range of robustness tests and checks, several structured-panel data regressions, and tests for abnormal and cumulative abnormal returns, the study reports a tendency for firms within the SRI-KEHATI index to maintain lower dividend policies during and after the crisis, despite certain economic indicators showing recovery post-crisis. These results reflect macroeconomic sensitivity to pre-crisis dividend policy, indicating a dynamic relationship between green investment companies’ dividend decisions and economic conditions. Findings also reveal that investor sentiment regarding dividends became increasingly selective post-crisis, emphasizing the need for financial stability and sustainability. Additionally, market reactions were markedly strong during the crisis but weaker and often negative in the pre-crisis period. These findings highlight the sensitivity of dividend policies to macroeconomic conditions and the intricate balance between financial stability and sustainability commitments in green investment firms. Managerially, the results emphasize the need for adaptive dividend policies that respond to economic fluctuations while reinforcing investor confidence through a focus on long-term financial resilience and sustainability. For investors, the research underscores the critical role of dividend stability as a signal of enduring value creation.