We analyse whether the investor sentiment affects the market reaction to dividend
change announcements. We use the European Economic Sentiment Indicator data, from
Directorate General for Economic and Financial Affairs (DG ECFIN), as a proxy for
investor sentiment and focus on the market reaction to dividend change announcements.
Our results indicate that the investor sentiment have some influence on the market
reaction to dividend change announcements, for two of the three analysed markets.
Globally, we find no evidence of investor sentiment influencing the market reaction to
dividend change announcements for the Portuguese market. However, we find evidence
that the positive share price reaction to dividend increases enlarges with sentiment, in
the case of the UK markets, whereas the negative share price reaction to dividend
decreases reduces with sentiment, in the French market
