Impact of economic policy uncertainty on dividend payout of Vietnamese listed firms: Does stock liquidity matter?

Abstract

This study investigates the impact of economic policy uncertainty (EPU) on the dividend policies of 498 listed companies in Vietnam from 2018 to 2023 and examines the moderating role of stock liquidity. Recent global events, such as the COVID-19 pandemic, the U.S.-China trade war, and China's real estate crisis, have heightened EPU and influenced markets worldwide. Dividends are essential in reflecting a firm's financial health and shaping shareholder investment decisions. Given Vietnam's status as an emerging market vulnerable to geopolitical shifts, this study applies Ordinary Least Squares (OLS), Fixed Effects Model (FEM), Random Effects Model (REM), and Feasible Generalized Least Squares (FGLS) to analyze the relationship between EPU and dividend payouts. A key aspect of this research is the moderating influence of stock liquidity, which may affect how firms adjust dividends in response to policy uncertainty. High-liquidity firms may exhibit greater financial flexibility, while low-liquidity firms could face constraints in adapting to uncertainty. The findings are expected to inform corporate governance and financial policies, helping firms optimize dividend strategies under varying liquidity conditions amidst economic uncertainty