The behavior of stock prices around the ex-day during a dividend shortage

This paper investigates the behavior of stock prices around ex-dividend dates in Europe over the period 2018-2022. In the early months of the COVID-19 pandemic in 2020, a significant fraction of firms cut, suspended, or reduced their dividend payments, leading to a shortage. Using a comprehensive sample of 14,844 dividend payments from 17 countries, we find that the magnitude of abnormal returns around the ex-dividend date is significantly larger during this period compared to normal times as dividend-seeking investors searched for the remaining payers. This pattern is amplified for high-yielding dividend stocks and in countries that temporarily imposed short-selling bans. Our results are consistent with a price-pressure hypothesis and challenge standard interpretations derived from an efficient market framework.