Parachute Effect of Dividends Paid in Times of Health Crisis: Case of Moroccan MSI 20 Companies

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Introduction
The share is a right of ownership which confers on its holder several rights, among others the dividend.This is a part of the profit made by the company which is returned to the shareholder for the share he holds and for the risk he is exposed to.
As a result, the dividend is a communication tool between the listed company and its market.In other words, a signal that reflects its state of financial health.
In this respect, the amount of the dividend paid varies according to several intrinsic and extrinsic factors.As for the former, we can cite the age of the company, its size and its sector of activity.The second is the macroeconomic situation.In other words, are we in a period of crisis or a period of economic prosperity?Indeed, in times of crisis, stock prices plummet given the reigning panic and the ambiguity that surrounds the markets.Consequently, the profitability of the action suffers the same fate.Moreover, this is a measure of the total remuneration of its holder.It is subdivided for this purpose into two components: the capital gain (or even the capital loss) and the dividend yield (Dividend Yield) which takes into account the dividend received by the shareholder for the security he holds and the risk he bears.This return constitutes the return that the shareholder expects from his investment.This is how we will study the dividend distribution policy on the Casablanca stock exchange, which has 77 listed companies belonging to 25 different sectors of activity.Only, we have chosen to study the most liquid values, which make up its latest MSI 20 index which was launched in 2020 and which definitively replaced the MADEX in January 2022, for a period of five years to better reflect the existence or not of a parachute effect of dividends.In other words, the parachute is a fall arrest device that aims to slow down and cushion the landing.In this respect, does the dividend paid by a listed company make it possible to absorb the sudden fall in its prices in times of crisis?

The Shareholder: Who Is It?
Who is the shareholder?And what theoretical framework are we going to refer to in order to give it an adequate definition ?
To answer these two questions, it is crucial to go back to the first works that have taken a liking to studying the public limited company in general and the shareholder more particularly.
In doing so, it is only since the 1930s that authors have begun to make the company the heart of their concerns.BERLE and MEANS had the privilege in 1932 of publishing their famous work The Modern Corporation and Private Property which makes the dichotomy between ownership and management which generates conflicts of interest between shareholders and managers.The company is therefore considered as a node of incomplete contracts.Also, COASE in 1937 wrote The nature of the firm where he presented the firm as an object of study in its own right because the market was considered in economics as the only battlefield.But it was not until 1976 when JENSEN & MECKLING explicitly presented their theory of agency which highlights the shareholder and the manager in a conflicting relationship.As a result, and as the first definition of the shareholder in the eyes of JENSEN & MECKLING, the latter appears as the principal who finances a firm.For Charreaux (2002), in an article published in the French Management Review, the shareholder is a contributor of cognitive resources since his relationship boosts the performance of the company.According to ALBOUY (2002), the shareholder is a contributor of financial resources, he is an essential actor in a market economy.In his own way, the shareholder is an equity contributor par excellence.
For us, the shareholder occupies a crucial place in every company and in every economy.Indeed, if the shareholder decides not to subscribe for the shares on the financial markets, the latter will be abandoned in favor of other substitutes.This could constitute a blockage of the financial system.In other words, savings will escape the financial markets and there will be a financial impasse creating a kind of shortage of financial resources.This scenario will create a breakdown of the financial system as a whole and there will be a form of crowding out.

Dividend: Income Paid to the Shareholder
Distributing a dividend is a decision taken by the company which remains dependent on several variables.Among other things, the age of the company, its sector of activity, the financial structure and the economic situation.
The dividend is therefore a key concept in finance and its distribution policy is still polysemic because until now, no policy has proven to be ideal, each company practices the distribution policy that suits it, no unanimity has arisen.What aroused the interest in 1976 of BLACK who qualified this situation of Dividend PUZZLE similarly called Puzzle of BLACK.
Indeed, the dividend is a part of the profit dedicated to the shareholder for the stake that he makes available to the company and for the risk that he assumes.It is part of the profitability of a stock.It is also considered as a signal issued by the company vis-à -vis its market to show good financial health.Moreover, a company that can distribute dividends is a profitable company that has been able to generate a profit.In this context, Ross (1977) in his theory of signals, highlights the role of the dividend in the signaling made by the company to the market which will impact its value.Bhattacharya (1979) is part of the same trend by announcing that the dividend informs the market of present and future cash flows.Moreover, according to him, managers or insiders are better informed than other stakeholders (outsiders) of the financial situation of the company.
In his own way, Albouy (2016) argues that the dividend does not enrich the shareholders.To prove this observation, a share which is worth 100 Euros on the stock exchange, and which gives a dividend of 3 Euros, after the date of detachment, it will only make 97 Euros.It will fall by the same amount of the dividend paid.In reality, the share price in the market will not be strictly 97 Euros, because there will be new information that will be integrated into the price to exert all its influence.
To tell the truth, this is true in the event that the shareholder has a short-sighted vision and rushes to get rid of his shares once the dividend is received.

Dividend and Crisis
The crisis is an avalanche that causes the collapse of entities and markets.To define it, we generally refer to its negative connotation.Indeed, several definitions have been put forward in this direction in order to give a definition of the crisis although it remains a real rigmarole.
The French sociologist Edgar MORIN led a reflection on the concept of crisis almost fifty years ago.He therefore argues that the crisis comes from the Greek and which means Decision.
According to Lagadec (1991), the crisis refers to a situation where multiple organizations, grappling with critical problems, subjected to strong external pressures, bitter internal tensions, find themselves thrown brutally and for a long period on the front of the stage, also projected against each other... all in a society of mass communication, that is to say live, with the assurance of making the headlines on radio, television, written , for a long period.
Regarding Bouilloud (2012), crisis is synonymous with rupture, shaking, malaise and radical and decisive change.It is a failure in forecasting anticipation.
From this definition, we conclude that when the expectations of decision-makers are undermined, the crisis sets in.
According to Libaert (2015), the crisis is the final phase of a series of dysfunctions jeopardizing the reputation and stability of a company.From all the above, crisis is a brutal movement, a ruinous and devastating slowdown in the activity of an organization or a state or even a state of affairs.And it is the negative connotation that reigns even if we also find that the crisis has a positive connotation but very little elucidated.In doing so, the crisis leads to a questioning of the existing, procedures, management tools and sometimes even requires a renovation of the legislative and legal framework.So the crisis can trigger the beginning of another phase and not the end.
Moreover, the crisis remains an obligatory passage of any economic cycle.
From these definitions, we notice that the crisis is seen from two angles: one that is punctual, abrupt, sudden and brutal, while the other is more processual.Indeed, taking a step back from the crisis, we conclude that it does not break out overnight and suddenly, it presents clues, signals and symptoms before setting in motion.The brutality concerns the last moment of the outbreak of the crisis.
If we come back to the dysfunctional, ruinous and devastating aspect of the crisis, the resulting damage can have a profound impact on the economy.And since the stock market can only be the barometer of this economy and the mirror reflecting it, then even listed companies pay the bill for this mess because there is a strong interaction between stock market and crisis.Such a crisis is corollary to feelings of panic and mistrust.As a result, the decisions of investors on the financial markets will be hit by a great decisional myopia.
Listed companies in this case must ease this shock by reassuring their shareholders and since the first consequence of the crisis is the sharp fall in stock market prices, then the returns on their shares are in turn affected.This profitability is as follows: C t : Price for period t; C t-1 : Price of period t-1; D t : Dividend received for period t.
Until now, we have taken the generic name of the crisis, knowing that it can take different forms: economic crisis, financial crisis, banking crisis, currency crisis and twin crisis.But given the outbreak of a health crisis of the Covid 19 pandemic on December 31, 2019 in Wuhan, China and the systemic effect it may have had by exporting it to the rest of the world, including Morocco, which has detected its first case in March 2020, it was necessary to study its impact on the dividend policy adopted by the 20 companies deemed to be the most liquid and which are included in the composition of the compact index of the new generation MSI 20 (Morocco Stock Index 20 ) which is a stock market index launched by the Casablanca Stock Exchange in December 2020.

Dividend Policy of Companies Listed on the Casablanca Stock Exchange in Times of Crisis 2020
To study the parachute effect, we will study the listed companies that make up the Morocco Stock Index (MSI) 20.As a result, twenty companies will be the subject of our study.These are the most liquid companies on the Casablanca Stock Exchange.

Presentation of Data
According to a last revision that the MSI 20 index underwent on 06/10/2022 to be applied by the Casablanca Stock Exchange on 13/10 of the said year, the various data are as follows : This table highlights companies listed on the Casablanca Stock Exchange which are part of the composition of the MSI 20 and which belong to various sectors of activity.They are of different ages which will result in disparate experience effects and different life cycles.For example, ATW is the oldest blue chip on the Moroccan financial market and the one that has been listed the longest since 1943.The market therefore gives it a leadership bonus.The other companies have varied IPO dates, which proves the existence of different visibility in relation to the market and vis-à -vis supply and demand.Similarly, the sample is made up almost entirely of cyclical stocks, apart from Label vie, which is active in the distribution sector, and Mutandis in agrifood and production.
We are going to check the dividend policy of these twenty companies for 5 years from 2017 to 2021, this choice is due to the health crisis that broke out in Morocco in March 2020.Indeed, to better study its impact on the policy of distribution of the dividends of these companies, it is necessary to go back by studying the years before the crisis and the years of the outbreak of the crisis.
The table below will outline the distribution policy adopted by the twenty companies: As for the EPS of the twenty companies, it is as follows: Certainly, the dividend alone is not enough to gauge the generosity of the company to its shareholders.We must therefore move on to the calculation of the POR (Pay Out Ratio).
This refers to the dividend distribution rate and which is the ratio between DPA and EPS.
The table below will outline the POR and Dividend Yield of the twenty companies subject to our study :

Data Analysis
Let's get to this stage, we will discuss the tables presented above.In doing so, among the twenty companies studied, ADI and ADH refrained from distributing dividends.It should be noted that the two companies belong to the same sector of activity, which is participation and real estate development.This sector is described as cyclical because it changes with the fluctuations of the economic situation, as a result it has suffered adverse consequences due to the pandemic.In addition, ADI has already suffered from heavy debt since 2014 and a massive decline in turnover.The company even laid off employees from its construction division.As a result, it has refrained from paying dividends since that date.For this, ADI has launched a restructuring program since 2015, it even issued a bond loan in the same year capped at 1 billion MAD.
In addition, ADI announced a profit warning for the year 2020 due to the downturn in its activity and the intensity of Covid 19.Douja promotion also issued an alert on its results in 2019 and 2020 given the difficult economic situation characterized by the severity of the health crisis, Sonasid suffered the same fate with a profit warning in 2019 and 2020 successively without forgetting Managem which in turn declared an alert on the results in 2019.
As for the other companies, most have recorded drops in their profits given the harmful impact of the health crisis, such as the banks.Take the example of BOA which lost 62.68% of its EPS between 2019 and 2020, the same for the two cement companies CMA and LHM which both lost 33.43% and 12.24% of their EPS between 2019 and 2020.
However, IAM has benefited from the pandemic given the intensive use of the net and telecommunication services.It should also be noted that DWY benefited from the crisis with a 24% increase in its EPS.This is due to the increase in its activity during the crisis and the increase in its turnover given the increase in sales of laptop PCs, printers inherent in the telework of employees and distance education triggered by the state emergency declared by Morocco.

Verification of the Parachute Effect of Dividends
One thing is certain: the shareholder occupies a crucial place in the life of companies.Without it, a large savings would miss their funding.
For this, when the market is bearish, dividends must serve as a buffer to fight against sudden falls in prices.
In Morocco, the dividend policies of most companies belonging to the MSI 20 have withstood the health crisis with more or less some differences.The most severe scenarios were recorded by ADI, ADH and MNG.According to this table, only three Moroccan companies belonging to the MSI 20 which validate the parachute effect of their dividends in front of the fall in prices because they have increased their DPS in a health crisis.It is the insurer AtlantaSanad, the distributor LabelVie and the cement manufacturer Lafarge Holcim Morocco.The latter, despite a decrease in its turnover in 2020, given the decline in its activity due to the health crisis and the shutdown of several construction sites, has increased the remuneration of its shareholders.
If we go back to AtlantaSanad, which experienced a historic event on June 1, 2020 by announcing its merger with the insurance company Sanad, its increased dividend distribution despite the crisis is the consequence of the increase in its turnover.which reached 4.9 billion MAD in 2020 compared to 2019.Something that is obvious with a business that is correlated with the rise in risk.
LabelVie is no exception, it has in turn increased its dividend in the midst of the avalanche of the pandemic given the increase in its activity and the performance it has experienced given the nature of its sector of activity: mass distribution.Moreover, during confinement, a major consumer trend characterized Moroccan society.

Conclusion
The Covid 19 health crisis has turned the planet upside down.It has considerably impacted all economies by slowing down/blocking their rate of economic growth.In this respect, production and consumption have been negatively affected without omitting other magnitudes such as the distribution of dividends which, in turn, have not been spared.
Indeed, distributing a dividend is a decision made by the company.Such a decision always remains polysemic in the eyes of researchers in finance.It is also a signal emitted vis-à -vis the market.Such a decision depends on several factors, including the crisis.
Admittedly, whatever its type, its shaking nature will have harmful repercussions on the solvency of economic agents, among others, listed companies.In this respect, we have throughout this research attempted to study a sample of twenty Moroccan companies listed on the Casablanca stock exchange and which are part of the MSI 20 in order to gauge how they handled their dividend distribution policies.in the midst of a health crisis?
We therefore conclude the following:  Two companies did not pay any dirhams to shareholders in the form of a dividend either in 2020 or in 2021.
To tell the truth, the health crisis is not the real cause, because ADI has suffered from financial problems since 2014.ADH, in turn, has not paid any money to its shareholders since 2018.This can be explained by several reasons: the decline in its turnover, profit warnings, the fall in its stock price and therefore in its market capitalization.
We therefore conclude that the companies that have waived the distribution of dividends have not been direct victims of the crisis, going back a little in time we can quickly discover that their situations were degraded even before the outbreak of such a crisis ;  IAM, which has been listed on the Casablanca stock exchange since 2004, is considered a Blue Chip on the Moroccan market.It emerged victorious from the health crisis by achieving 36.77 billion MAD in 2020, recording an increase of 0.7% compared to 2019 and yet it reduced its DPA.This was a real disappointment

Table 1 .
Identification of the twenty MSI 20 companies Source: Author based on the Casablanca Stock Exchange website.

Table 2 .
Dividend Per Share (DPA) of MSI 20 index companies from 2017 to 2021

Table 3 .
Earnings Per Share (EPS) of MSI 20 index companies from 2019 to 2021 Author based on the Casablanca Stock Exchange website and CDG Capital.

Table 4 .
Five-year study of the Pay Out Ratio (POR) and Dividend Yield of companies in the MSI 20 index