Capital Market Reactions Research Articles

Market Reaction to the 2024 Election Results: Prabowo-Gibran's Presidential Announcement

This study examines the capital market's reaction to the announcement of Prabowo-Gibran’s victory in the 2024 Indonesian presidential election by the General Elections Commission (KPU) using event study methodology. The research focuses on abnormal returns, trading volume activity (TVA), and security return variability (SRV) of companies listed in the LQ-45 index. Data was collected for an event window spanning five days before and after the announcement. The results show no significant changes in abnormal returns, indicating that the market had already priced in the expected outcome prior to the official announcement. Trading volume activity increased slightly but this change was also not statistically significant,suggesting that the announcement did not introduce substantial new information. Similarly, SRV decreased slightly but not significantly, pointing to a relatively stable market reaction. The findings align with the Efficient Market Hypothesis, suggesting that the market had already absorbed the election outcome based on early survey data. These results contrast with previous studies that identified significant market reactions to political events, highlighting the unique nature of investor behavior in this particular event.

Environmental Incidents, Policy Regulations, and Capital Market Reactions: Evidence from the “Cadmium Rice” Event in China

Environmental Incidents, Policy Regulations, and Capital Market Reactions: Evidence from the “Cadmium Rice” Event in China

Information asymmetry, policy shocks, and international equity investment: Evidence from the anti‐corruption campaign in China

AbstractInformation plays a critical role in financial transactions and markets, especially in international investment where foreign investors are at an informational disadvantage relative to domestic investors. Prior studies show a positive reaction of the Chinese capital market to China's anti‐corruption campaign, which is also consistent with improved performance of Chinese listed firms following the campaign. We document a contrasting reaction of less‐informed foreign investors. Exploiting staggered anti‐corruption investigations across provinces as plausibly exogenous shocks, we find that foreign institutional investors increase their equity investments in Chinese listed firms headquartered in affected provinces following the anti‐corruption campaign; foreign individual investors, by contrast, reduce their equity investments after the campaign, which is driven by those with non‐Chinese ethnicity. Further analyses show that the increased equity investments of foreign investors stem primarily from those residing in jurisdictions sharing a similar cultural tradition with China. Our study has significant implications for foreign investors in the context of the increasingly intense relationship between China and the West.

How do investors value the publication of tax information? Evidence from the European public country‐by‐country reporting

AbstractWe examine the costs associated with public disclosure, as opposed to confidential reporting, of tax country‐by‐country reporting (CbCR) information. Our study addresses a critical knowledge gap, considering the growing adoption of public tax transparency measures. We aim to illuminate this matter by examining the expected costs for firms of making previously confidential CbCR information publicly available. The fact that the information was previously confidentially reported to the tax authorities allows us to assess the cost of publication in isolation. Employing an event study methodology, we provide early evidence on the capital market reaction to this new requirement on a sample of European firms falling within its scope. We document a significantly negative cumulative average abnormal return of EUR 47 billion to 64 billion for up to 3 days following the announcement. Additional cross‐sectional results suggest that concerns about the reputational costs arising from public scrutiny and the proprietary costs from disclosing sensitive business information outweigh the potential benefits of an extended information environment from an investor perspective. Our findings highlight that the public disclosure of tax information imposes significant—and likely unintended—costs from a firm perspective. This aspect should be carefully considered when developing tax transparency measures.

CAPITAL MARKET REACTION TO PRABOWO-GIBRAN’S VICTORY IN THE 2024 PRESIDENTIAL ELECTION IN INDONESIA : TESTING ON INFOBANK15

This research aims to analyze the capital market reaction to the event study of Prabowo-Gibran's victory in the Indonesian Presidential Election by comparing the variables of stock price, stock return and Infobank15 stock trading volume activity in the research period 20 days before and 20 days after the announcement on March 20 2024. Including quantitative research because the data taken is secondary data sourced from idx.co.id where the population which is also a sample is 15 leading banks with good performance according to the Indonesian Stock Exchange. The research results reveal that there is no difference in the average stock price, average stock return and average TVA before and after the announcement of Prabowo-Gibran's victory.

Eleven sectors’ reaction to the political event 2023: evidence from Indonesia Stock Exchange

Research aims: This study analyzes the differences in market reaction towards eleven sectors in the Indonesia Stock Exchange (IDX) during the political event, i.e., the announcement of the Indonesian presidential and vice-presidential nominees in 2023.Design/Methodology/Approach: This study applied the event study method with indicators of abnormal return, trading volume activity, security return variability, and bid-ask spread. The hypothesis test was a non-parametric test by Wilcoxon Signed Rank Test with a window period of seven days of observation (-3, 0, +3).Research findings: The Wilcoxon Signed Rank Test results revealed a mixed reaction by eleven sectors in IDX to this political event, in which there was a difference and no difference in the reactions.Theoretical contribution/Originality: This study contributes to providing insight into the reaction of eleven different sectors in the IDX to the different announcements of the Indonesian presidential and vice-presidential nominees in 2023. Previous research usually focused on stock indices or only testing one particular sector. Hence, this study investigated eleven sectors in the capital market to compare the different reactions and to expand the results.Practitioner/Policy implication: Research on capital market reactions to political events provides important information for investors to make investment decisions based on investor sentiment that assesses the electability of prospective heads of state to advance the Indonesian economy.Research limitation/Implication: The scope of this study is the announcement of the Indonesian presidential and vice-presidential nominees in 2023; future researchers can continue research on capital market reactions to the Indonesian presidential election 2024 events and add relevant variables, such as foreign sales and foreign buys.

Konsep Ekonomi Kebijakan dalam Pemerintahan Presiden Joko Widodo

This research is a literature review of the Economic Policy Package launched by President Joko Widodo in 2015. The Economic Policy Package consists of several volumes. When it was first launched, namely Volume 1, the economic policy package aimed to stimulate the real sector and drive the economy. Volume 1 of the Economic Policy Package is one of 16 economic policy packages launched until 2018. A review of the literature related to the Economic Policy Package volume 1 was conducted to identify the latest research related to economic policy packages and provide an assessment of the effectiveness of the Government's policies related to the Economic Policy Package. There are several aspects of national economic development, such as economic growth, inflation, and fiscal and monetary policies.Literature both in the form of academic studies and opinions and public perceptions of economic policy packages are explored in depth mainly by using search engines in the form of both formal and informal studies such as mass media. This study found that the literature related to Economic Policy Package Volume I is relatively limited and the discussion tends to focus on the impact of policies on capital market reactions. In addition, research on economic policy packages is dominated by quantitative approaches. In the future, it is necessary to expand the discussion of economic policy packages with broader theories, use a qualitative approach and dig deeper into the effectiveness of the economic policy packages

Capital Market Reaction to the Strengthening of the Rupiah Exchange Rate against the US Dollar Exchange Rate

The purpose of this study is to analyze the response of Indonesian capital markets to differences in average abnormal returns and average trading volume activity before and after the strengthening of the IDR/USD exchange rate. This study is a quantitative study using the event study method. The sample used consists of the stocks included in the LQ45 index. the most active stocks with a large daily trading volume. Hypothesis testing and paired t-test. The results of the hypothesis test show that: there is no significant difference in the average abnormal returns before and after the strengthening of the rupiah against the US dollar because are sig. (2-tailed) value of 0.417 > 0.05; there is no significant difference in the average trading volume activity before and after the strengthening of the rupiah against the US dollar because sig. (2-tailed) value of 0.080 >0.05. Keyword: Market Reaction; Event Study; Abnormal Return; Trading Volume Activity; Exchange Rate

Capital Market Reaction To The Announcement Of Fuel Price Increase On Stock Returns Of Lq 45 Transportation Sub-Sector In 2023

The research was conducted to find out the reaction of the capital market to the rise in BBM in transportation and logistics sector companies listed on the Indonesian Stock Exchange. This study is an event study or event that arises directly from the rise in the price of oil (BBM) on October 1, 2023, against the market reaction based on the actions of transportation and logistics companies. Abnormal Return and Trading Volume Activity are variables used to analyze reactions. The data collection method used in this research is the Quantitative Data Method. Observations were conducted for 5 days before and 5 days after the BBM rise on October 1, 2023, using the Wilcoxon Signed Ranks test with a sample of 10 companies and a data test of 110. On the test results, there were abnormal differences in return and trading volume activity before and after the rise in BBM prices, the results could help market participants understand market dynamics, find investment opportunities, and manage risk. With a rise in sales, this means investors respond to events so that the markets react. The findings support the theory of signals because investors see the announcement of a BBM rise as a signal that can affect the stock price.

PENGARUH PENGUMUMAN DIVIDEN TERHADAP ABNORMAL RETURN DAN TRADING VOLUME ACTIVITY PADA PASAR MODAL INDONESIA TAHUN 2020-2021

The Covid-19 pandemic has had a broad impact on all sectors in Indonesia. Many investors responded by selling their shares to minimize potential losses that could be caused by continued economic uncertainty. Market conditions that continue to experience significant decline have triggered a crisis in the capital market. In an effort to calm panic in the market, dividend announcements are considered an effective strategy because they have a positive signal that can provide confidence to investors and act as a counterweight to market volatility. Therefore, this research aims to determine the effect of dividend announcements on abnormal returns and trading volume activity in the Indonesian capital market in 2020-2021. This research uses the event study method which studies the capital market's reaction to an event whose information is published as an announcement. The research results show that there is an influence of dividend announcements on abnormal returns in the Indonesian capital market, especially in the energy and consumer cyclicals sectors and there is an influence of dividend announcements on trading volume activity in the Indonesian capital market, especially in the basic materials and technology sectors. "Pengumuman dividen ; Abnormal return ; Trading volume activity ; Covid-19"

Capital Market Reaction to the 2019 Indonesian Presidential Election in Advertising and Advertising Companies

The momentum of the 2019 Election had an impact on the capital market as a reaction to investors. Investors will of course pay attention to this momentum in the capital market to avoid losses. So by knowing the Average Abnormal Return value, investors will know how they should react to capital market movements during the 2019 Election. The aim of this research is to analyze the capital market reaction to the 2019 Presidential Election. The results of this research show that Average Abnormal Return occurs and has an impact on capital market reactions. This happens because capital market sentiment follows developments and changes regarding emerging issues regarding the winner in the 2019 Presidential Election. Basically, investors' main goal in purchasing shares is to gain profit, so the instability of the Average Abnormal Return will disrupt the process of investing in shares. due to a decline in investor confidence.

Analisa Reaksi Pasar Modal terhadap Perang Rusia-Ukraina pada Bursa Efek Indonesia

This research aims to analyze the impact of the Indonesian capital market's reaction to the announcement of Russia's invasion of Ukraine on February 24 2022. Special focus is given to companies in the food industry sector that use wheat as the main raw material. Six companies listed on the Indonesian Stock Exchange that rely on wheat were the subject of analysis. The research method uses an event study approach by calculating cumulative abnormal returns and average trading volume activity in the time period February 2022-March 2022. The research results show that there are no significant differences in the calculated variables between the periods before and after the announcement of the Russian-Ukrainian invasion. The implication is that the Indonesian capital market, especially companies in the food industry sector, did not experience a significant impact due to this incident. This research contributes to understanding the capital market response to geopolitical events and its relevance to the food industry sector in Indonesia. In conclusion, the resilience of the Indonesian capital market to certain foreign events and emphasizes the importance of diversifying raw materials in the food industry to reduce potential external risks. Keywords: Reaction Analysis, Indonesian Stock Exchange, Geopolitical Impact, Capital Markets, Russian-Ukrainian War

The Impact Of Russia's Invasion Of Ukraine On Capital Market Reaction In Energy Sector Companies Listed On The Idx

This study was conducted to determine the impact of Russia's invasion of Ukraine on capital market reactions in energy sector companies listed on the Indonesia Stock Exchange. Abnormal Return and Trading Volume Activity are variables used to analyze reactions. Observations were made for 5 days before and 5 days after the invasion on February 24, 2022 using the T test and Wilcoxon Signed Ranks test with a sample of 29 companies and a total of 145 data tested. In the test results there are abnormal differences in return and trading volume activity before and after the invasion of Russia and Ukraine, this proves that market reaction to the events of the Russian invasion of Ukraine has strong information content and causes an increase in buying and selling activity which means investors respond to events that occur so that the market reacts.

The Capital Market Reaction and the Influencing Mechanism of the Establishment of the Data Basic Institutional System

This study uses a sample of A-share listed companies to investigate the impact of China’s Data Basic Institutional System on capital market reactions and the mechanism by which it exerts influence. The findings reveal that within a 5-day period before and after the policy announcement, listed companies with high data resources experience a significantly higher abnormal return compared to those with low data resources. Moreover, this difference becomes more pronounced as enterprise technology intensity increases. Furthermore, the policy enhances the capital market’s perception of the value of data resources and its potential for generating multiplier effects. Additional tests confirm that post-implementation of the policy, the capital market reevaluates the long-term value of enterprises associated with data resources. This comprehensive examination contributes empirical evidence to support academic research, inform policy formulation, and guide strategic planning in relevant industries.

Circular causality analysis of corporate performance and accounting quality in M&As.

The past performance and the capital structure of the companies that are involved in mergers and acquisition (M&As) are considered into the analysis of the circular causality relationship between financial performance and market value. Considering two models, one for value relevance and one for accounting conservatism, this paper aims to analyze if the capital market influences the accounting practices of a target company or that the accounting figures influence the capital market. The analyzed sample used in the study is represented by the target companies involved in M&As which took place in the European Union Enlarged in 2017-2018. Financial and market data were considered for eight years (2011-2018). Using the conservatism model, the results show that targets' earnings are significantly influenced by their financial leverage as an indicator for financial structure. Using the value relevance model, the capital market reaction is influenced by prices and return on equity that indicates the capital market influence on accounting figures.

Abnormal Comparison Analysis of Return and Trading Volume Activity Before and After The Announcement of The Covid 19 Pandemic

The Covid-19 pandemic has been a significant turning point in global history, not only from a public health perspective but also in the context of its impact on economic stability, including capital markets. This research aims to analyze the reaction of the Indonesian capital market to the first case of Covid-19 by focusing on two indicators, namely Abnormal Return (AR) and Trading Volume Activity (TVA). Observations were carried out seven days before and seven days after the first announcement of Covid-19 in Indonesia. The research population includes Financial sector companies listed in February and March 2020 on the Indonesia Stock Exchange (BEI). The purposive sampling method was used to select 30 financial companies that met certain criteria. A quantitative approach and comparative method were used in this research, tested using the Wilcoxon Signes Rank Test. The research results show significant differences in AR before and after the announcement of the Covid-19 pandemic. The increase in Abnormal Returns after the announcement indicates that investors tend to trust companies that already have a record of returns or profits before the event, rather than having to rely on predictions of future profits. The Wilcoxon Signed Rank Test results also revealed significant differences in Trading Volume Activity before and after the Covid announcement, indicating changes in trading activity in the capital market. This research provides insight into how the Indonesian capital market responds to health crisis events such as Covid-19, and can serve as a basis for further understanding of economic and financial dynamics in facing similar challenges.

Reaksi Pasar Modal Akibat Pengumuman Kenaikan Harga Bahan Bakar Minyak pada Saham LQ45 Bursa Efek Indonesia

The announcement of an increase in fuel prices is an informative event for investors and can influence share prices in the capital market. This research aims to determine the capital market reaction due to the announcement of an increase in fuel prices on September 3 2022. This research was conducted on companies listed on the BEI LQ45 index using a saturated sampling technique. The date for the event is set on Monday, September 5 2022, which is the first trading day after the announcement of the fuel price increase on September 3 2022 taking effect. The event period in this research is 7 trading days. Hypothesis testing in this research uses one sample t-test. The research results show that the announcement of the fuel price increase on September 3 2022 did not create significant abnormal returns around the event, which shows that the market is in an efficient condition in a semi-strong form.
 Keywords: Abnormal Return; Efficient Market Hypothesis; Fuel Price Increase; Capital Market Reaction; Signaling Theory

Analisis Reaksi Pasar Modal Sebelum Dan Sesudah Pengumuman Tarif Cukai

The capital market part of economic activity that is susceptible to being influenced by events. The aim of this research was to analyze the influence of the announcement of excise rates in 2020-2022 on the capital market reaction. The capital market reaction is measured the Abnormal Return and Trading Volume Activity. The research sample is 4 cigarette companies listed on the Indonesian Stock Exchange. This research method is event study. The event window of 5 days before and after the event. The test results show that there is a significant difference in abnormal returns in 2020 and 2022 before and after the announcement of the cigarette excise rate increase. However, there is no difference in abnormal returns in 2021 and trading volume activity in 2020, 2021 and 2022 before and after the announcement of the cigarette excise rate increase.

Managerial capture of sustainability assurance. Empirical evidence and capital market reactions

PurposeThis paper aims to investigate the potential influence of managers on sustainability assurance. When the quality of sustainability reporting is questionable because of subsequent restatements, the authors explore whether assurance is used to enhance its credibility as a legitimization tool or as an impression management strategy. Additionally, the authors analyze how capital markets react to this potential managerial capture and, particularly, whether investors penalize this practice through the cost of capital.Design/methodology/approachUsing an international sample from 2012 to 2016 and panel data regressions, this study relies on DICTION’s master variables of optimism and certainty to examine the impact of managers on assurance and the market’s reaction to these practices.FindingsThe study shows that some managers might use assurance as a legitimization tool rather than as a means of reinforcing the credibility of sustainability reporting. In such cases, the results reveal that investors penalize (reward) managerial influence (no influence) on assurance.Practical implicationsThe new findings help companies understand that they will not improve their financing terms if investors perceive that managers have influenced assurance. Moreover, these findings emphasize the need for standardization to clarify assurance criteria and prevent managerial influence.Social implicationsManagerial influence on assurance raises doubts about its value in terms of reducing information asymmetry and especially improving investors’ decision-making.Originality/valueThe present study represents the first evidence of the potential use of assurance for non-informative purposes. The authors provide clear evidence of how investors penalize managerial influence on assurance, in contrast to the mainstream literature, which shows that this practice always improves investors’ decision-making and is rewarded.

Analysis of the Effect of Accounting Information Quality, Institutional Ownership, and Financial Performance on Capital Market Reaction: A Case Study on Company XYZ on the Indonesia Stock Exchange

This research investigates the interplay between accounting information quality, institutional ownership, financial performance, and capital market reactions within the context of the Indonesia Stock Exchange (IDX). Employing Structural Equation Modeling with Partial Least Squares (SEM-PLS), a diverse sample of IDX-listed companies spanning various sectors, sizes, and leverage levels was analyzed. The measurement model assessment confirmed the reliability and validity of selected indicators, while the structural model revealed significant positive relationships between accounting information quality and institutional ownership with capital market reactions. Surprisingly, financial performance did not show a direct impact on market reactions. The model exhibited a good fit, explaining 60.2% of the variance in capital market reactions. Implications for investors and corporate decision-makers are discussed, emphasizing the strategic importance of transparent reporting and attracting institutional investors. Limitations include cross-sectional data and potential endogeneity concerns. This research contributes to the understanding of market dynamics in the Indonesian context and suggests avenues for future exploration.