Capital Market Reactions Research Articles

REAKSI PASAR MODAL INDONESIA TERHADAP PELUNCURAN RUDAL KOREA UTARA

This study aimed to examine the Indonesia capital market reaction to the North Korean missile launching. The type of this research is an event study by using the market model estimation to estimate the expected return. This research used 100 days as the estimated period and 9 days as the windows period. The sample of this research consisted of 76 companies listed in the Index Kompas 100. The result shew that the stock price did not react negatively toward North Korean missile launching. In this research, the emergence of disturbing events at t+3 and t+4 that North Korea succeded in testing hydrogen bomb disturb the events observed by the author. At t +3 and t+4, the stock price react negatively and significantly. The result of this research supported the Signaling theory that the information about a country’s particular events such as information about North Korea’s succes in testing a hydrogen bomb was interpreted as a negative signal (bad news)

The effect of the digital readiness of economies on international M&A performance

PurposeUnderstanding the mechanism through which digital economy is significantly impacting all dimensions of global economy has become a rising priority in recent years. The purpose of this paper is to investigate the critical role of digital readiness of economies around the world on the performance of international M&As as one of the major corporate strategies for firms' global expansion. We also study circumstances under which digital readiness of an economy matters to international M&As.Design/methodology/approachThe authors examined how digital readiness superiority (or inferiority) of the United States in comparison with host countries impact capital market reaction to international M&As announced by US public companies. To do this study, analysis was run on a sample of 1,393 IMAs by publicly traded US firms during the 2010–2016 period.FindingsThe study reveals that those public US companies that target companies in countries, in which the US has superior digital readiness to them, show better performance in terms of investors' reaction (capital market reaction) to the announcement of international M&As. In fact, markets will look at the superiority of US digital readiness to target country as an opportunity for transferring digital capabilities. Moreover, these patterns are pronounced in those M&A deals in which the acquiring company is from high-tech industry. However, interestingly when US companies already have a profitable growth track record or when acquirer and target are in the same industry, the market reacts negatively to this digital superiority.Originality/valueOverall, this study contributes to a better understanding of the mechanisms through which digitalization of economies impact the performance of multinational enterprises. It adds to the information management literature on corporate global strategy and is one of the first to examine the role of digital readiness on international M&As performance.

REAKSI PASAR MODAL DARI DAMPAK PERISTIWA HARI BESAR AGAMA ISLAM TERHADAP ABNORMAL RETURN DAN TRADING VOLUME ACTIVITY SAHAM PERUSAHAAN INDEKS JII YANG TERDAFTAR DI BURSA EFEK INDONESIA

The purpose of this study is to analyze the capital market reaction from the impact of religious holidays which will be indicated by the presence or absence of abnormal return and trading volume activity. The sample used is the Jakarta Islamic Index (JII). This type of research is event study so that the observation period is used to see reactions before and after the event occurs. The events used in this study were the Birthday of the Prophet Muhammad, Isra Mi'raj, Eid al-Fitr, Eid al-Adha and Islamic New Year. The observation period used is from 2014 to 2017. The research period used was 7 days before the event and 7 days after the event. Data sources are obtained from Yahoo Finance, Sahamok.com and IDX. The data used in this study are secondary data, such as stock closing prices, IHSG closing prices and stock trading volume. The analytical tool used to test the hypothesis in this study is a paired t-test. The results showed that Eid al-Adha holidays had a significant difference to the abnormal return and trading volume activity before and after holidays. There were no significant differences in the abnormal return and trading volume activity before and after the Miraj Isra holiday. While the birthday of the Prophet Muhammad SAW, Eid holidays and Islamic New Year holidays there is no significant difference between abnormal stock returns and there are differences in trading volume activity before and after holidays.

ANALISIS REAKSI PASAR SEBELUM DAN SESUDAH PELANTIKAN KABINET INDONESIA MAJU PADA PERUSAHAAN BUMN DI BURSA EFEK INDONESIA

President Joko Widodo had been inaugurated ministers in the Advanced Indonesia Cabinet that will help him to undergo the wheels of government in the 2019-2024 period on October 23, 2019. The inauguration is one of the important event in the capital market shows that there are some reactions of the event. The aims of this study to see how the reaction of capital market by looking at the differences of the variabels abnormal return, trading volume activity and trading frequency of stock before and after the event. The research object is 20 companies of state-owned corporation on period during September–November 2019. The analytical method used to test is compares two means from each variables. The observation period is 14 days which is 7 days before and 7 days after event. This hypothesis test used paired sample t-test analysis. The result of this research shows that there is significant differences between abnormal return before and after of event, there is no significant differences between trading volume activity before and after of event, and there is a significant differences between trading frequency before and after event. Keywords: Event Study, Abnormal Return, Trading Volume Activity, Frequency of Stock Trading

The Influence of a Political Event on Property Sector Stocks in Indonesia Stock Exchange

This study examines the capital market reaction from the declaration of the presidential and vice presidential candidates for the 2018 presidential election, which will be marked by the presence or absence of abnormal returns. The samples used are stocks that are incorporated into the property sector. As a study of events, this research observes the reaction before, during, and after the event within the observation period. The periods of research used were H-3 (before the event), H0 (current events), and H + 3 (after the event). The data are obtained from www.idx.co.id. The data used in this research is secondary data, such as the stock closing price, which has been adjusted (the closing price is adjusted), and the closing price of IDX. The data are in the form of daily stock prices. These data are then analyzed using the analytical method of the paired sample t-test. The results showed that Abnormal Return had no significance. This means that there is no market reaction when there is an excess of actual return compared to a normal return in the stock exchange of the property. The significance level has a negative condition exactly three days before the declaration of presidential and vice-presidential candidates, which is dated August 6th, 2018. However, in the following days, the 7th and 8th of August 2018, it has experienced an insignificant level of positive. This means that the market perceived appropriately before the presidential and vice-presidential candidates were set. In addition, the statistics test result of the Average Trading Volume Activity (TVA) proved that there was a significant difference between the period before and after the official registration of the presidential and vice-presidential candidates in the General Election Commission (KPU). The results showed that there were significant differences due to the value of sig. greater than 0.05 or 0.006 ≥ 0.05.

The capital market reaction to Central Environmental Protection Inspection: Evidence from China

Central Environmental Protection Inspection (CEPI) is an important innovative measure meant to improve the health of China’s environment. In view of this, based on the "quasi natural experiment" situation of the implementation of CEPI in China, this paper takes as its research sample 155 A-share listed companies located in the provinces in which CEPI was first implemented. Our work uses the event study method to explore the reaction of China’s capital market to this policy implementation. The results show two significant findings. (1) CEPI will cause the capital market to react negatively because of the environmental protection pressure that it brings to bear on corporations; that is, the capital market will experience significantly negative abnormal returns due to the signals sent by CEPI. (2) Further analysis shows that the multiple heterogeneity factors will have an impact on the capital market’s reaction to CEPI. Specifically, at the corporate level, we find that firms that cause heavy pollution, firms that are small-scale, and firms with weak political connections are more sensitive to the market’s reaction to the CEPI policy; at the regional levels, the effect is more significant in areas with high environmental performance.

Capital Market Reaction in Indonesia Stock Exchange to Stock Split Events Reviewed From Abnormal Returns, Trading Volume and Bid-Ask Spreads in Growing and Good Speaking Companies

Capital Market Reaction in Indonesia Stock Exchange to Stock Split Events Reviewed From Abnormal Returns, Trading Volume and Bid-Ask Spreads in Growing and Good Speaking Companies

EKSISTENSI MANAJEMEN LABA DAN NILAI TUKAR RUPIAH (KURS) SEBAGAI KATALISATOR REAKSI INVESTOR PASAR MODAL PADA PERUSAHAAN FARMASI YANG TERDAFTAR DI BURSA EFEK INDONESIA PERIODE 2015-2019

This study aims to determine the partial or simultaneous effect of earnings management and the Rupiah exchange rate (Exchange rate) on the market reaction of pharmaceutical companies listed on the Indonesia Stock Exchange for the 2015-2019 period. This research is a quantitative research. The source of data in this study is secondary data in the form of annual financial statements of companies listed on the IDX. Then the stock price is obtained from the yahoo finance site. The sampling method is purposive sampling. The data analysis technique used is multiple regression analysis of panel data constructs. The results of this study indicate that partially earnings management has no significant effect on capital market reactions while the Rupiah exchange rate (exchange rate) has a significant effect on capital market reactions. Simultaneously, earnings management and the exchange rate of the rupiah (exchange rate) have a significant effect on the reaction of the capital market

Does the market accept the perpetual bonds issued by commercial banks? Evidence from China

ABSTRACT Despite the prevalence of the research on the issuance of perpetual bonds by non-financial enterprises, Chinese commercial banks only started using perpetual bonds for financing in 2019. Taking the first bank perpetual bond issued by the Bank of China (BOC) as an example, this study analyzes the economic consequences of commercial banks issuing perpetual bond financing using the event study method. Specifically, it analyzes the change in the excess return rate before and after the event and impact of the information disclosure behaviour of BOC’s perpetual bond financing on stock prices to determine the capital market reaction before and after the issue. The issuance of perpetual bonds had a short-term negative effect on stock prices but, overall, investors hold a positive attitude towards the perpetual bonds issued by the BOC, which may be related to the choice of market time for the issuance.

Analisis Perbedaan Abnormal Return dan Cumulative Abnormal Return Emiten Sektor Keuangan Sekitar Pemilu 17 April 2019

This research was prepared using the event study method to analyze the Indonesian capital market reaction to a political event that can be seen from differences in abnormal returns and cumulative abnormal returns of shares before and after the general election event on 17 April 2019. The observation period carried out for 11 days consisted of 5 days before the event date, one-day event date, and 5 days after the event date. The population of the data used are financial sector companies listed in the period January to April 2019 on the Indonesia Stock Exchange, then the sample was taken using a purposive sampling obtained as many as 73 of 91 companies. While the data amalgamation technique uses the Wilcoxon Signed Rank Test because the data used doesn’t meet the assumption of normality. The results showed that there were no differences in abnormal returns and cumulative abnormal returns of financial sector issuers between before and after the general election 17 April 2019. Therefore, the general election 17 April 2019 didn’t contain important information for market participants so the market didn’t overreact.

Indonesia's Capital Market Reaction Election Events

Penelitian ini bertujuan untuk mengetahui apakah terdapat peningkatan/penurunan aktivitas pasar modal sebelum pengumuman hasil Pemilihan Umum Presiden 2019, apakah terdapat peningkatan/penurunan aktivitas pasar modal setelah Pemilihan Umum Presiden 2019 dan sebelum pengumuman hasil Pemilihan Umum Presiden 2019, dan apakah terdapat peningkatan/penurunan aktivitas pasar modal setelah pengumuman hasil Pemilihan Umum Presiden 2019. Data yang digunakan dalam penelitian ini adalah data sekunder. Dari analisis yang dilakukan pada 45 perusahaan yang tergabung dalam LQ45 yang dimulai dari 15 Maret sampai dengan 21 Juni 2019. Alat analisis yang digunakan adalah uji statistik parametrik Repeated ANOVA. Hasil penelitian menunjukan bahwa pengumuman hasil pemilu 2019 tidak memberikan pengaruh yang kuat terhadap pergerakan aktivitas pasar modal pada sebelum, saat dan sesudah hasil pemilu diumumkan, ini dibuktikan dari nilai Abnormal Return dan Trading Volume Activity dengan signifikansi sebesar 0,173 dan 0,520 yang lebih besar dari nilai α sebesar 0,05, sehingga dapat dikatakan bahwa tidak terdapat perbedaan yang signifikan Abnormal Return dan Trading Volume Activity pada kondisi sebelum, saat dan sesudah pengumuman hasil pemilu. Berdasarkan hasil tersebut, maka pengumuman hasil pemilu tidak memberikan pengaruh yang kuat terhadap pergerakan aktivitas pasar modal di bursa efek Indonesia. Para investor merasa yakin bahwa siapapun presiden yang terpilih akan memberikan dampak yang positif bagi negara.This study aims to Determine Whether there is an Increase / Decrease in capital market activity before the announcement of the results of the 2019 Presidential Election from, whether there is an Increase / Decrease in capital market activity after the 2019 Presidential Election and before the announcement of the results of the 2019 Presidential Election, and Whether there is an Increase / Decrease in capital markets activity after the announcement of the results of the 2019 Presidential Election. The Data used in this study are secondary data. From the analysis conducted on 45 companies incorporated in LQ45 starting from March 15 until June 21, 2019. The analytical tool used was the Repeated ANOVA parametric statistical tests. Results showed that the announcement of the 2019 election results did not have a strong influence on the movement of capital market activities before, when and after the election results were announced, this was evidenced from the Abnormal Return and Trading Volume Activity with a significance of 0,173 and 0,520 which was greater than the α value of 0:05, so it can be said that there is no significant difference Abnormal Return and Trading Volume Activity in conditions before, during and after the announcement of election results. Based on Reviews These results, the announcement of election results did not have a strong influence on the movement of capital market activities on the Indonesian stock exchange. Investors feel confident that whoever is Elected will have a positive impact on the country.

Reaksi Pasar Modal terhadap Kunjungan Raja Arab dan Presiden Korea Selatan ke Indonesia

The purpose of this study is to analyze the capital market reaction to a political event. The event of visitation of the Arab King to Indonesia on Maret 1st-9th 2017 and visitation of the President of South Korea to Indonesia on November 9th 2017 on the members of stock index LQ45. The sampling method used in this study was purposive sampling with a total sample of 30. The data analysis technique used was Paired Sample Test with the event period of 11 days. The results of the analysis show the following: 1) Not difference in average abnormal return before and after visitation of the Arab King to Indonesia. 2) There are difference in average trading volume activity before and after visit of the Arab King in Indonesia. 3) Not difference in average abnormal return and average trading volume activity before and after visitation of the President of South Korea to Indonesia. 4) The visitation of the Arab King to Indonesia has increased compared to the visitation of the President of South Korea to Indonesia. Keywords: event study; abnormal return; trading volume activity

Do Financing and Investment Determine the Capital Market Reaction? Evidence from Listed Mining Companies in Indonesia

Objective – The level of trust in the stocks market is one of the important factors to improve the company’s image in facing the increasingly challenging global market. The stock market’s trust can be analyzed by the business capital owned by its company. This research aims to analyze the influence of financing and investment on the dependent variables of capital reaction taking the samples of mining companies listed on the Indonesia Stock Exchange (IDX). This study also analyzes the responses in the ability of mining companies in the capital market. Design/methodology – The associative approach has been used in this research and a descriptive research model has been utilized. This research is intended to examine the free effect of financing and investment on the dependent variable of the market reaction. The sample used in this study is saturated sampling. Samples of 32 companies out of 44 mining companies listed on the IDX were drawn for analysis purposes. Results – This study found that DER financing and PER investment (price-earnings ratio) have no significant impact on capital market reaction TVA (trading volume activity) in listed mining companies in Indonesia. It can be concluded that increasing quality of mining companies in Indonesia are mostly not influenced by the power of DER and investment PER.

Reaksi Pasar Modal terhadap Peritiwa Pengeboman Gereja di Surabaya

This study aims to examine the extent of the capital market reaction in the form of cumulative abnormal returns and cumulative trading volume activity from the bombing of the Church in Surabaya 13 May 2018 both in 3 Manufacturing Sectors and as a whole Manufacturing Companies. This study involved 97 Manufacturing companies listed on the IDX. The results showed that there was a significant difference between cumulative abnormal return 2 days before and 2 days after the bombing of the Church in Surabaya May 13, 2018 in the Miscellaneous Industry Sector and Basic and Chemical Industries, while the Consumer Goods Sector there was no significant cumulative abnormal return difference. The results also showed that there was a significant difference between cumulative trading volume activity 2 days before and 2 days after the bombing of the Church in Surabaya May 13, 2018 in the Consumer Goods Sector and the Basic and Chemical Industry Sector, while in the Various Industry Sector there was no difference in cumulative trading significant volume of activity. Meanwhile, the overall Manufacturing Company results showed that there was a significant difference between cumulative abnormal return and cumulative trading volume activity 2 days before and 2 days after the bombing of the Church in Surabaya 13 May 2018.

To Report or not to Report about Coronavirus? The Role of Periodic Reporting in Explaining Capital Market Reactions during the Global COVID-19 Pandemic

We use a hand-collected sample of roughly 300 international firms included in leading stock-market indices in ten countries to investigate how firms’ reporting practices during the coronavirus (COVID-19) pandemic impact stock market reactions in term of stock performance and risk. For this, we claim that it is important to analyze whether firms are capable of early risk-detection and of adapting their reporting practices accordingly by examining whether firms promptly and appropriately incorporate critical current global developments, such as the coronavirus pandemic, in their reporting process. We hand-collect firms’ 2019 annual reports and analyze if and how extensively they include assessments of the coronavirus pandemic and its potential impact on their business activities by employing textual analysis. Next, we examine if and how this is incorporated in capital market reactions in terms of stock risk and stock performance. Our results highlight two main findings. First, by using the capital market model, we find that firms’ reporting on COVID-19 in early released annual reports leads to decreases in beta values. Thus, firms’ increased ability to detect risks early and report on the impact of COVID-19 leads to better stock risk assessments by capital markets, an effect that is amplified by state ownership. Second, we show that firms reporting about the coronavirus pandemic in their annual report exhibit a significant improvement in their abnormal returns compared to those that do not. Our findings indicate that investors value firms’ transparency and their ability to promptly incorporate critical global developments in their reporting process. Thus, we show that firms’ reporting practices play an important role in better understanding the current capital markets’ reactions to the ongoing coronavirus pandemic.

REAKSI PASAR MODAL INDONESIA TERHADAP PERISTIWA POLITIK

The purpose of this research is to see how the Indonesian capital market reacts to political events. The political event referred to in this study was the election of the President. Capital market reaction can be seen from the presence or absence of differences in abnormal returns before and after the presidential election. The sample in this study companies included in the LQ 45 index during the presidential election period. The presidential election itself was held on April 17, 2019. Observations were made 10 days before the presidential election and 10 days after the presidential election. The data analysis method used is the paired sample t test. The results showed that there were no differences in abnormal returns before and after the election event. The results of this study indicate that the capital market does not react to these political events.

Sins of the Father: The Effect of a Parent Firm's Accounting Misconduct on Current and Former Subsidiaries

We exploit a unique setting to examine how managerial and economic connections affect the current and former subsidiaries (“subsidiaries”) of a parent firm undergoing a restatement and bankruptcy. The demise of Enron and the varying nature of ties between Enron and its four publicly traded subsidiaries allow us to examine if capital market reactions for each of the subsidiaries surrounding Enron’s failure vary with the nature of their connections to Enron. We observe no significant differences in contemporaneous market reaction regardless of the nature and strength of connections between Enron and the subsidiaries, providing two main insights. First, over the year following the Enron events, those subsidiaries with ownership or accounting ties but with weak economic ties performed in-line with the industry, consistent with the lack of a differential market reaction across these sets of firms. This result contrasts with recent studies finding evidence of manager fixed effects affecting accounting choices. Second, we find that Enron’s most economically connected subsidiary (predictably) went bankrupt shortly after Enron, suggesting a market under-reaction at the time of the Enron events. Additional analysis provides some limited evidence that low institutional ownership or slow analyst forecast updating partly explains this under-reaction. Our study adds to the literature on restatements, management reputation effects, peer information transfer, and the market’s ability to react to specific fundamental information.

Capital Market Effects of ESG Materiality Standards

We investigate the capital market reaction in response to the publication of the Sustainability Accounting Standards Board’s (SASB) standards on the financial materiality of environmental, social, and governance (ESG) issues. Based on the argument that accounting mechanisms impact perceptions through precision, we expect the SASB standards’ classifications of ESG items as either financially material or financially immaterial to impact investors’ assessments of firms. We employ a pooled event study exploiting the staggered release of the sector-specific standards from 2013 to 2016. We find a negative capital market reaction following the standards’ publication for firms with low material ESG performance and a positive capital market reaction for firms with high material ESG performance. The reaction is stronger, in both magnitude and significance, for low-performing firms. Our findings indicate that voluntary non-financial accounting standards influence investors’ perceptions about firm value.

Market reaction before and after stipulation of presidential regulation point 55 in 2019

The purpose of this study is to examine the capital market reaction to the adoption of Perpres no. 55 2019 with abnormal return and trading volume activity as indicators. This study uses 10 companies listed in the automotive subsector and components in the Indonesia stock exchange in the period of 5 days before and after the adoption of Presidential Decree No. 55 of 2019. The analysis technique used in this study is the Wilcoxone Signed Rank Test and the Paried Sample t-test test. Wilcoxone Signed Rank Test results prove that there are differences in the average negative abnormal return before and after the stipulation of Presidential Regulation no. 55 2019 based on the results of these tests it can be concluded that investors consider the information as bad news (bad news). Paried Test Results in The t-test sample proves that there is no difference in the average trading volume activity before and after the stipulation of Presidential Regulation no. 555 in 2019 based on these tests it was concluded that it did not trigger stock movements in the capital market that affect the supply and demand of existing shares in the automotive and component sub sector shares.

DOES MARKET REACT TO TAX REDUCTION NEWS? AN EMPIRICAL STUDY ON CORPORATE TAX REDUCTION OF BANGLADESH IN 2017-18

Purpose – This study tries to investigate the capital market reaction to the corporate tax reduction announcement (37.5% from 40%) in Bangladesh for publicly listed Banking, Insurance and Financial Institutions of 2017-18. Methodology – This study applied an event study approach to identify any significant average abnormal returns as well as cumulative average abnormal returns of all the publicly listed Banks, Insurances and Financial institutions around the announcement period. Findings – Insignificant average abnormal return (AAR) experienced in case of Banking and Insurance industry on event day, except the financial institutions which have generated a statistically significant abnormal negative return on announcement day. The combined AAR of all three sectors has also generated statistically insignificant return around event windows which suggest that investors did not consider tax reduction news as valuable information for investment decision nor considering it as an essential factor of share value. Limitation – The study did not consider any possible extraneous variable that could result in insignificant reactions. Practical Implication – The findings of this research would considerably contribute to the financial and economic policy formulation while taken into consideration the possible impact of the policy over the capital market of Bangladesh. Originality – This study makes a considerable input to the research in the area of taxes linked to the behavioural finance applying the unique variable of investor’s reactions.