Dividend policy and crisis: Exploring the interplay between performance and financial constraints in the French context

The purpose of this paper is to determine the effect of the Covid-19 pandemic crisis on dividend policy and performance and explore the interplay between performance and financial constraints to identify how such a fit affected dividend policy during the crisis. We used a final sample of 106 SBF-listed firms during six years. To assess the effect of the crisis, we divided this period into three subperiods: pre-crisis (2016–2018), pandemic period (2019–2021), and all periods (2016–2021). A System Generalized Method of Moments (SGMM) is used to deal with the problem of endogeneity caused by the lagged dependent variable. The results showed that only the crisis and the financial constraints (KZ index) negatively correlated with dividend payment levels (DivPaid). This dividend level did not take performance into account. Regarding the control variables, only debt, growth, and size positively impacted dividend levels. Moreover, the performance of French companies was negatively influenced by the DividPaid, KZindex, and Crisis variables. The findings suggest that France should prioritize dividend payments to protect a company's reputation and financial health. These findings have significant implications for investors, financial analysts, regulators, and policymakers who are looking for guidance on dividend policy in uncertain situations.