Capital Market Reactions Research Articles

REAKSI PASAR MODAL INDONESIA TERHADAP PEMILU PRESIDEN AMERIKA SERIKAT TAHUN 2020

The 2020 United States Presidential election is a political event that has received widespread attention worldwide. The United States is one of the countries that can affect the stock market returns and volatility in other countries. The objective of this study was to analyze Indonesia’s capital market reaction to the events of the 2020 United States Presidential Election as measured by comparing the difference in the AAR and ATVA before and after the event. This study was conducted using an event study approach on companies that are included in the IDX80 index from the period of February - July 2020. The purposive sampling method was used with a total sample of 79 companies. This study was used data analysis technique in the form of one sample test with a window period of 7 days. The results of the study showed that: (1) There was no significant difference in the AAR on the stocks included in the IDX80 index before and after the events of the 2020 United States Presidential Election. Whereas (2) there was a significant difference in the ATVA on the stocks included in the IDX80 index before and after the events of the 2020 United States Presidential Election.

Indonesia Composite Index and Market Reaction in Indonesia Due to Covid-19 Pandemic

This study aims to examine the impact of the Covid-19 pandemic on the Indonesia Composite Index (ICI) and the reaction of the Indonesian capital market to events related to the Covid-19 pandemic in Indonesia. There were two events observed, the first event was the announcement of the first positive case of Covid-19 in Indonesia, and the second event was the determination of the status of a national disaster by the Indonesian government. Testing of effect of the Covid19 pandemic on stock prices was carried out by using an independent sample t-test against the average ICI before and after the two events. Testing the market reaction using the event study methodology. The test results found that the ICI average decreased significantly after the announcement of the first positive Covid-19 case. The ICI average also decreased significantly after the determination of the national disaster status. The average ICI return did not differ significantly before and after the two events. The market reaction test found no significant abnormal returns around the two events. The Covid-19 pandemic had an impact on the Indonesian capital market, marked by a decline in the ICI, although investors in the capital market did not react excessively, so there was no significant abnormal return.

Capital Market Reaction to The Tax Amnesty Policy (Study on Banking Sector Share in Indonesia)

An event or a policy taken by the government can be one of the considerations for investors in making investment decisions in a country. The existence of these events certainly contains information that can be interpreted to carry out transactions in the capital market. The tax amnesty policy is assumed to contain information that is able to respond to capital market players. The reaction of capital market participants can be measured by abnormal returns and trading volume activity. Therefore, it is necessary to conduct research on the reaction of the capital market to the tax amnesty policy in Indonesia on shares in the banking sector because banks are the gateway for the entry of tax amnesty funds. There are 14 bank shares included in the study that fall into the criteria of government perception banks and have IPOs. This study uses the event study analysis method with an observation period of 11 days, namely t-5 to t+5 and t0 as event dates in all tax amnesty policy periods, period I (1 July 2016), period II (1 October 2016), period III (1 January 2017). The research analysis technique used a paired sample t test. The results of the study indicate that there is a reaction in banking stocks to the tax amnesty policy which can be seen from the significant positive difference between the cumulative average abnormal return before and after the tax amnesty policy period I and II, as well as the difference in cumulative average trading volume activity between before and after the tax amnesty policy period I, II, and III. The results of the study conclude that the tax amnesty policy has succeeded in increasing trading activities and providing abnormal returns to investors for two periods on banking stocks so that this issue provides meaningful information and is good news for investors.

Female Directors and Firm Value: New Evidence from Directors’ Deaths

This paper examines how female directors (FDs) affect firm value in the absence of mandatory gender quotas. Using a newly collected data set on director deaths around the globe, we find that stock prices decrease approximately 2% more when an FD passes away, compared with a male director. What explains this negative capital market reaction? We find evidence that finding successors for deceased FDs is challenging for firms: Succession delays are longer, and although firms try to replace FDs with women, two-thirds of their successors are male. Furthermore, their successors tend to be younger, less experienced, and more often externally hired. Stock prices decline less if more potential female successors exist in a country, the firm is larger, or FDs other than the deceased woman were on the board. Because observable characteristics such as age, tenure, education, and network centrality cannot explain the negative stock market reaction, unobserved differences across genders that lead to a lower fit of male successors to the existing board are the most likely explanation for the firm value loss after the death of an FD. This paper was accepted by David Simchi-Levi, finance. Supplemental Material: Data are available at https://doi.org/10.1287/mnsc.2022.4412 .

Summaries of Articles

Summaries of Articles

The Effect of Profitability and Corporate Size on Company Value with Good Corporate Governance as a Moderating Variable in Manufacturing Companies

Manufacturing companies are chosen as the object of research because manufacturing companies listed on the Indonesia Stock Exchange (IDX) each year are developing and consist of various industrial sub-sectors so as to reflect the overall capital market reaction. This research aims to find out the effect of profitability and the size of the company on the value of the company with good corporate governance (GCG) as a moderator variable, as well as whether good corporate governance (GCG) is able to moderate the relationship between profitability and the size of the company to the value of the company. The population in the study was a company. The population in the study is a Manufacturing company listed on the Indonesia Stock Exchange (IDX) in the period 2018-2020. Samples collected using the purposive sampling method totaled 31 companies determined as samples. The methods used in this study are descriptively quantitative, and the nature of the research is explanatory. The data collection techniques used are documentation as well as the types and sources of data used are secondary data. The study used partial least square (PLS) data analysis methods. The results showed that profitability affects the value of the company, the size of the company has no effect on the value of the company, Good Corporate Governance (GCG) is not able to moderate the relationship between profitability and the size of the company to the value of the company.

Common ownership and the spillover effect of market reaction: Evidence from stock exchange comment letters

Currently, there is a debate on the impact of common ownership. Some researchers find common ownership leads to increased cooperation and decreased competition among common-held firms while other studies show that there is no robust evidence showing the effect of common ownership. In this paper, by applying the receipt of stock exchange comment letters as an exogenous shock for common-held firms, we find the following results on the capital market's reaction to comment letters on common ownership: 1) there exists a significant spillover effect of the market reaction. Not only the firms receiving comment letters experience negative abnormal returns, but also their cross-held firms; 2) the spillover effect is caused through the mechanism of corporate governance as the effect is more pronounced for firms with poor corporate governance; 3) there exists heterogeneous characteristics on the spillover effect for different firms since the state-owned enterprises are less likely to be affected by the comment letters. The findings can provide regulators, investors, and managers a better understanding on the role of common ownership.

Taxing the Digital Economy: Investor Reaction to the European Commission’s Digital Tax Proposals

This study analyzes investor reaction to the European Commission’s proposals on the taxation of digital firms. Examining the stock returns of potentially affected firms surrounding the proposals’ release, we find a significant abnormal capital market reaction of −0.692 percent. This corresponds to an absolute market value reduction of more than 52 billion euros, 40 percent of which is attributable to US firms. Investor reaction is stronger for firms that engage more in tax avoidance and for those with higher European Union exposure. Overall, investors perceive the event as a threat to digital firms’ future profitability and react in line with the proposals’ intentions to secure tax revenues and to extract location-specific rent.

Law enforcement spillover effects in the financial sector

AbstractRecipient firms but also comparable peer firms exhibit a sizeable negative capital market reaction to United Kingdom's regulatory enforcement actions. This result is invariant to the identification of peer firms as belonging to the same industry classification or as having comparable propensity scores to attract a sanction. Indiscriminate regulatory contagion, however, is ruled out. As per expectation, enforcement actions which pierce the ‘corporate veil’, that is, target an individual within a firm, are related to no significant firm‐level market reactions. These findings, in the financial sector, indicate that sanctions are associated with a material spillover effect consistent with informed regulatory contagion.

Economic consequences of IFRS convergence: evidence from phased manner implementation in India

PurposeThis study is to examine the economic consequences of International Financial Reporting Standards (IFRS) converged standards by exploring its phased manner implementation in India.Design/methodology/approachThe study measures the economic outcomes in the form of capital market reactions such as cost of equity capital, cost of debt capital, information asymmetry and market liquidity. Difference-in-difference (DiD) methodology has been used to analyze the data for this study.FindingsBased on a sample of 2,685 Bombay Stock Exchange (BSE) listed firms, results show that the Indian capital market reacts negatively to the adoption of IFRS-converged standards. In particular, results show that the cost of equity capital, cost of debt capital and information asymmetry have been increased and market liquidity has been decreased for test firms relative to benchmark firms immediately after IFRS convergence and this negative effect is more pronounced among small firms than large firms. Subsequent tests suggest that test firms have better capital market reactions in the later year of implementation relative to benchmark firms that are implementing IFRS for the first time. It indicates the learning curve effect of IFRS on the economic outcomes as negative impact ameliorates over time.Originality/valueThe study is among earlier attempts to investigate the impact of IFRS on capital market reactions by exploring the phased manner implementation framework. The study is also among the pioneering attempts to examine the learning curve impact of IFRS on capital market reactions.

The Power of Words: An Empirical Analysis of the Communicative Value of Extended Auditor Reports

We examine the communicative value of extended auditor reports in the United Kingdom (UK), where ISA 700 (UK and Ireland) requires auditors to disclose the risks of material misstatement that had the greatest effect on the audit – key audit matters (KAM). By using methods from computational linguistics, we find that different proxies for communicative value (i.e., readability, evaluative content, visual aids, and specificity) improve in post-ISA 700 periods. Cross-sectional tests show that the improvement differs across audit firms and audit clients as well as KAM disclosure characteristics. Finally, broadly consistent with concurrent studies, we find no evidence that several proxies for communicative value are informative to investors. However, we find initial evidence that a more specific description of KAM is significantly and positively associated with capital market reactions, suggesting that investors value precise information. Overall, this study directly responds to the call for more research on how KAM are worded.

DAMPAK COVID-19 TERHADAP ABNORMAL RETURN DAN VOLUME PERDAGANGAN SAHAM

The COVID-19 pandemic is a non-natural disaster that has a huge impact around the world. This research is a quantitative research with event study method. The purpose of this research is to test the capital market reaction by looking at abnormal returns and trading volume activity before and after the COVID-19 non-natural disaster. The event day in this study was April 13rd, 2020 when the Presidential Decree was issued regarding the designation of COVID-19 as a national disaster. Using purposive sampling method, the sample of this study were 27 companies engaged in the hotel, restaurant, and tourism sub-sectors listed on the Indonesia Stock Exchange. The event period is 11 days, namely 5 days before the event, 1 day at the time of the event and 5 days after the event. Data analysis using t-test and wilxocon signed ranks test. The results of this study are: 1) there is no abnormal return during the event period, 2) there is no difference in the average abnormal return before and after the COVID-19 non-natural disaster event, 3) there is no difference in the average trading volume activity before and after the COVID-19 non-natural disaster event and after the COVID-19 non-natural disaster event.
 Keywords: Event Study, Abnormal Return, Trading Volume Activity, COVID-19.

ANALISIS POTENSI ABNORMAL RETURN POSITIF TERBESAR SAHAM PT.KALBE FARMA SELAMA PANDEMI COVID-19

This study aims to analyze the largest potential positive abnormal return present in PT. Kalbe Farma during the Covid-19 pandemic. The event study method was used in this study to study indonesia's capital market reactions during the observation period. The observation period was carried out when covid-19 was detected in Indonesia from March 2020 to February 2021 or one month after the implementation of the first covid-19 vaccination in Indonesia. Secondary data used in this study is in the form of daily stock closing stock price data, and daily JCI. The results of the study found that there was an abnormal positive return with the largest value on March 31, 2020 with an abnormal positive return value of 0.12013 and January 11, 2021 with a value of 0.15726

Analysis of Abnormal Returns Before and After the Announcement of the Merger of State-Owned Sharia Banks

AbstractPurpose - This study aims to examine the capital market's reaction to the merger of BUMN Syariah Banks, which is seen as abnormal returns at PT Bank BRI Syariah Tbk.Method - The data for this study were taken ten days before and ten days after announcing the BUMN Sharia Bank merger. The data was processed by paired sample t-test using SPSS.Result - Based on the analysis and discussion results, it shows that there is no market reaction to the announcement of the signing of the BUMN Islamic bank merger on BRIS shares as seen from the abnormal returns before and after the signing of the merger, which there is no significant difference.Implication - This can happen because the world is currently facing the COVID-19 pandemic, which causes market uncertainty. In addition, abnormal returns are not the only indicator to measure the wealth created by an event. Another factor that causes no significant difference in abnormal returns is that the data used in the event window research is daily and short enough to have no visible reaction. Furthermore, the issue of a merger has also been circulating before the announcement of the signingOriginality- This article examines abnormal returns before and after the announcement of the merger of State-Owned Sharia Banks

KETERKAITAN ABNORMAL RETURN DAN TRADING VOLUME ACTIVITY PADA BERBAGAI PERISTIWA PEMILU

This research is an event study that aims to find out whether there is empirical evidence of the reaction of the Indonesian capital market to political events in the country, namely the 2015 Regional Head Election, 2014 Presidential Election, and 2020 US Presidential Election, using abnormal return indicators and trading volume activity. The population in this study are stocks that are included in the top 10 capitalization companies in Indonesia. The data used in this study is secondary data consisting of daily stock prices, daily stock trading volume, and daily stock price index for five days before and five days after the incident. The statistical tool used to test the hypothesis is the paired sample t-test. The results of the statistical calculation of the paired sample t-test both abnormal return and trading volume activity show that there is no difference in the average abnormal return and trading volume activity before and after the event

Reaction of Sharia Capital Market toward Political Events in Indonesia

This study aims to examine the reaction of the sharia capital market to political events in Indonesia. The political events referred to in this study are the events of the 2014 and 2019 presidential elections. The market reactions used are abnormal returns and stock trading volume. The sample in this study is stocks included in the Jakarta Islamic Index (JII) during the study period, which are 22 stocks. This study used an event study with an observation period of 21 trading days, namely 10 trading days before, one day of the day event, and 10 trading days after the 2014 & 2019 presidential and vice presidential elections. From the result, it can be seen that both tests are greater than 5%. Therefore, H0(1 and 2) are accepted.

Does Trading Volume Activity React To The Announcement of Large-Scale Social Restrictions During The Covid-19 Pandemic?

This research is an event study that aims to examine the information content as measured by trading volume activity as a form of capital market reaction to the announcement of the COVID-19 pandemic in Indonesia. The purpose of this research study is to determine and analyze the presence or absence of trading volume activity before and after the announcement of Large-Scale Social Restrictions in the context of handling COVID-19 in Indonesia. The analytical method used in the study is a quantitative method in research with an event study approach which is used to analyze the reaction of the capital market to the announcement of large-scale social restrictions (PSBB) in the context of handling the COVID-19 pandemic in Indonesia. The data analysis technique in this research is using event study. The results showed that there were significant differences in stock trading volume activity before and after the announcement of the PSBB policy during the Covid-19 pandemic in DKI Jakarta.

Impact of reporting foreign exchange gains on capital market reactions (an empirical study of manufacturing companies listed on the Jakarta stock exchange in 2003-2004)

The purpose of this study is to test empirically the impact of reporting foreign exchange gains on market reactions. The results of previous studies state that there is a correlation between the exchange rate (exchange rate) and stock prices. Based on these studies, researchers are motivated to conduct this research. This study uses Abnormal Return and Trading Volume Activity as a proxy for market reaction and uses 41 manufacturing companies listed on the Jakarta Stock Exchange in 2003-2004 as samples. The sample selection used purposive sampling method. Market reaction to the reporting of foreign exchange gains is tested using the event study methodology. Researchers make corrections to beta to reduce the influence of bias on the Jakarta Stock Exchange. Correction for beta uses the Fowler and Rorke (1983) method with four leads and four legs. The statistical method used to test the hypothesis is multiple regression analysis. Before carrying out multiple regression analysis, a classical assumption test was first performed to obtain an unbiased and efficient estimator or Best Linear Unbias Estimator (BLUE). The results of this study indicate that there is a significant market reaction around the publication date of the financial statements reporting foreign exchange gains by the company. This study shows that the reporting of foreign exchange gains has a significant effect on market reactions as measured by Cummulative Abnormal Return. However, there is no significant effect from reporting foreign exchange gain on Trading Volume Activity.

The Capital Market Reaction To The Corona Covid-19 Virus Outbreak Events

This study aims to get a real picture of the Capital Market Reaction to the Corona Covid-19 Virus Outbreak (Study on LQ-45 Companies Listed on the Indonesia Stock Exchange). The analytical tool used is descriptive statistical analysis and classical assumption test. To test the hypothesis, it is done using data analysis in the form of Paired Sample T-Test using the statistical program "Product and Service Solution" (SPSS). The results of hypothesis testing using paired sample t-test obtained t-value with a significant value of 0.000 (0.000 <0.05). From these results, it can be stated that the hypothesis is accepted, which means that there is a significant difference in abnormal returns before and after the Corona / Covid-19 Virus Outbreak. The difference in Abnormal Return on the test results has a positive value, this shows that if the Corona / Covid-19 Virus Outbreak has increased, the Abnormal Return value will increase.

Capital Market Reaction Analysis Before and After Bank Indonesia's Decision Regarding Interest Rates

The development of capital market activities can not be separated from the role of investors as investors and disclosure of information as consideration of investor decision making.This research aims to find out how the capital market reacts before Bank Indonesia's decision on interest rates.And to find out how the capital market reacted after Bank Indonesia's decision on interest rates.This research uses quantitative research that is event study. Data collection of financial statements at the Investment Gallery of the Indonesia Stock Exchange, University of Muhammadiyah Sidoarjo.The population in this study includes LQ45 companies that have been listed on the Indonesia Stock Exchange, with sampling techniques namely total sampling.Data analysis using T-test. The results of this study prove that there is a difference in the average abnormal return before and after Bank Indonesia's decision on interest rates as evidenced by the value of Sig.(2-tailed) is 0.000 less than 0.005 and there is a difference in average trading volume activity before and after Bank Indonesia's decision on interest rates as evidenced by the value of Sig.(2-tailed) 0.000 less than 0.005.