Consumer confidence as a mediator between dividend announcements and stock returns

Hasan, Fakhrul ORCID: https://orcid.org/0000-0002-5406-9906 and Al-Najjar, Basil ORCID: https://orcid.org/0000-0003-2753-7142 (2025) Consumer confidence as a mediator between dividend announcements and stock returns. Review of Quantitative Finance and Accounting. ISSN 0924-865X

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Abstract

In this study, we examine the potential influence of consumer confidence on the association between announcing dividend payments and stock returns. We used FTSE 350 spanning the period from 1990 to 2021, using the UK consumer confidence index as a proxy for investor sentiment. The primary empirical test focused on cumulative abnormal returns [− 1, + 1], supplemented by a robustness test spanning [− 10, + 10]. Additionally, a generalized method of moments (GMM) estimation was conducted using CAR [− 1, + 1]. Our analysis revealed: under positive consumer confidence, firms announcing dividend increases experienced a positive market response, while under negative consumer confidence, firms announcing dividend decreases elicited a negative market reaction. This study contributes valuable insights to the discourse on investor sentiment and its impact on stock market dynamics.