Significant Abnormal Returns Research Articles

Stock Price Reaction Analysis Before And After The Announcement Of The First Covid-19 PSBB Implementation On The Lq-45 Index Listed On The Indonesia Stock Exchange

This study was conducted to determine the reaction of stock prices before and after implementing the PSBB for the first time. Stock price reactions were measured by abnormal returns and trading volume activity using the event study method with an adjusted market model approach. The population used in this arrangement is the number of companies listed on the LQ-45 index for the February-July 2020 period, as many as 45 companies. The sample used a saturated sampling technique for as many as 45 companies. This research data uses secondary data consisting of daily stock closing prices and daily stock trading volumes with an observation period of seven days before the event, one day when the PSBB was implemented, and seven days after the PSBB was implemented. The statistical tools used were the normality test and the one-sample t-test. The results of this study indicate that there is a significant average abnormal return. However, there is no difference in abnormal returns before and after implementing the first PSBB. Besides that, the results show a significant average trading volume activity. However, trading volume activity is the same before and after the first PSBB implementation.

The Effect of the HPP Law on Market Reaction: A Study on the Indonesian Stock Exchange

This study aims to examine the market reaction to tax reform. Tax reform was carried out by the government on the issue of post-covid economic recovery and responding to environmental changes. This policy has a new tax regulation policy in Indonesia in the form of a carbon tax, an increase in VAT, and an increase in income tax. This research is event study research. The population of this study is companies listed on the Indonesia Stock Exchange on October 7, 2021. The data are taken from Yahoo Finance, totalling 753 companies. The sampling method used is the purposive sampling method, with the sample in the form of the Kompas 100 index and each company sector listed on the Indonesia Stock Exchange with a total of 9 sectors with an observation period of 10 days, 5 days, and 3 days before and after the ratification (-10.10), (-5.5), and (-3.3). The market reacted to the tax reform, and there was a significant abnormal return (p-value <0.05). Companies in the agricultural and mining sectors are companies that are of interest to investors. In contrast, companies in the financial, trade, services, and investment sectors are not attractive to investors with negative cumulative abnormal returns.

The beta anomaly in the Australian stock market and the lottery demand

Frazzini and Pedersen (2014) [Betting against beta. Journal of Financial Economics, 111(1), 1–25] report an insignificant performance for the betting against beta (BAB) strategy in the Australian equity market, suggesting that the beta anomaly does not exist in this market. We extend their sample period and find strong evidence for a low-beta effect. The arbitrage portfolio that takes long positions in low-beta stocks and short positions in high-beta stocks generates a significant abnormal return of 5.9% per year. The beta anomaly over 1995–2019 is strong and robust after controlling for risk factors and stock characteristics. Decomposition of the beta anomaly into stock and industry level components shows that the low-beta effect is driven by the firm, and not the industry level beta. We further find that lottery demand explains the low-beta effect. In a series of portfolio and cross-sectional analyses, we show that the abnormal returns related to the beta anomaly become insignificant after controlling for lottery demand. The findings are robust to different proxies for lottery demand, alternative beta estimation and regression analyses. There is no evidence that the beta anomaly can be explained by leverage constraints, coskewness risk or investment and profitability risk factors. We further show that beta anomaly is more pronounced during the upmarket than the downmarket periods and that lottery demand plays a role in its time-variation. The findings have important implications for retail and institutional investors who trade on beta.

“Not all climate risks are alike”: Heterogeneous responses of financial firms to natural disasters in China

This paper explores the capital market responses of financial firms to natural disasters in China. Using the event study approach, we demonstrate that the capital market responses of financial firms vary to the type of natural disaster. These heterogeneous responses are also affected by the type of financial firm. Security companies are generally more sensitive to all types of disasters and have statistically significant negative abnormal returns. Banks only respond to earthquakes, whereas insurance companies have generally insignificant cumulative abnormal returns to all three type of natural disasters.

Sorry Doesn't Cut It, or Does It? Insights from Stock Market Responses to Corporate Apologies

This paper examines the stock market reaction to corporate apologies. We construct a comprehensive database of corporate apologies issued for major chemical disasters between 1985 and 2017. Results from event studies and cross-sectional regressions suggest that 1) on average there is no significant stock market response after a firm apologizes; but when we allow for heterogeneity in the type of apologies, we find that 2) some apologies are associated with significant abnormal returns. In particular, firms that shift the blame to others consistently experience positive abnormal returns, while firms that admit to making mistakes tend to face negative stock market reactions in the longer-term. Greater media coverage for the chemical spill and the apology is associated with a negative and positive stock market response, respectively. Our findings are consistent with a signaling theory of apologies and help shed light on corporate crisis management and understanding of what makes an effective apology.

How Elon Musk's Twitter activity moves cryptocurrency markets

Elon Musk, one of the richest individuals in the world, is considered a technological visionary and has a social network of over 110 million followers on social media platform Twitter. He regularly uses his social media presence to communicate on various topics, one of which is cryptocurrency, such as Bitcoin or Dogecoin. Using an event study approach, we analyze to what extent Musk's Twitter activity affects short-term cryptocurrency returns and volume. In other words, we investigate whether cryptocurrency markets exhibit a “Musk Effect”. Based on a sample of 47 cryptocurrency-related Twitter events, we identify significant positive abnormal returns and trading volume following such events. However, we discover that on average, price effects are only significant for Dogecoin-related Tweets but not for Bitcoin. This is because regarding the latter, the significant price effects of positive and negative news cancel each other out. Considered in isolation, non-negative tweets from Musk lead to significantly positive abnormal Bitcoin returns. Individual tweets do raise the price of Bitcoin by 16.9 % or reduce it by almost 11.8 %. Our study shows the significant impact that the social media activity of influential individuals can have on cryptocurrencies. This suggests a conflict between morals, risks of market manipulation and investor protection.

ANALYSIS OF ABNORMAL RETURN AND TRADING VOLUME ACTIVITY BEFORE AND AFTER THE LQ45 COMPANY CASH DIVIDEND ANNOUNCEMENT FOR THE 2020 PERIOD

An increase in the trading volume of dividend-declaring shares at a particular moment may indicate that the company is performing well and has promising prospects. The dividend announcement includes crucial information for investors seeking abnormal returns. This study seeks to determine and assess whether there is a difference between AR and TVA before to and following the release of cash dividends. This study's data analysis method is a parametric statistical data analysis method. This method is used to statistically evaluate population parameters, or in other words, to test population size using pre-selected sample data and a significance level () of 0.05 or 5%. A data set is considered regularly distributed if asym.sig is less than 0.05. Sig. 0.277 > 0.05 indicates that there is no change in the average abnormal return before and after the declaration of cash dividends for LQ45 Company 2020. The findings of evaluating the sample data for trading volume activity indicate, with a significance level of 0.000 < 0.05, that there is a difference in trading volume activity before and after the release of cash dividends for LQ45 Company 2020. A significant negative abnormal return value at t-4, t-1, t0, t+3, t+4, and t+5 conveyed bad news, therefore investors overreacted to alter stock prices, resulting in disparities in trading volume activity before to and following the announcement of cash distributions. Indirectly, the declaration of cash dividends can impact the trading volume activities of LQ45 Index-listed businesses.

The Market Reaction to Cross‐border Listings: Evidence from AH Listed Firms

The Market Reaction to Cross‐border Listings: Evidence from AH Listed Firms

Reaksi pasar saham atas peristiwa disahkannya Omnibus Law RUU Cipta Kerja

This research aims to analyze stock market reaction on the legalization of Omnibus Law the Job Creation Act on October 5, 2020. The market reaction is measured using abnormal return, average abnormal return and trading volume activity which happens in manufacturing company consumer goods sector food and beverage sub sector listed on the Indonesia Stock Exchange. The research sample is determined by using non probability sampling method with purposive sampling technique. Hypothesis testing used one sample t-test and wilcoxon signed rank test in which the observation period is 15 days using SPSS tools. The results of the hypothesis testing show that there is a significant abnormal return on the 3rd day dan 7th day after the Job Creation Act legalization. There is no significant difference in the average abnormal return between the period before and after the Job Creation Act legalization. There is no significant difference in the trading volume activity between the period before and after the Job Creation Act legalization.

UK, US, and China’s Stock Market Reactions to The Russia-Ukraine War: An Inspection across Industries

The Russia-Ukraine crisis is expected to have a considerable impact on the global economy. By applying the event study approach, we examine the effect of the war on the UK, the US, and China across ten major industries over different lengths of the event window around 22 February 2022. The observed significant cumulative abnormal returns (CAR) in specific industries, along with the differences between nations, are comprehensively analyzed with actual situations faced by each country. Through comparisons, the UK is concluded to be mainly more affected by the crisis than the US and China, especially in the material, information technology, and consumer staples industries. Notably, all three countries are observed to have positive and significant CARs across the event window, which provides strong evidence of the adverse impact of the Russia-Ukraine war on the global energy supply. In other industries, the harmful effects of the crisis vary from countries. This study could provide a new, broad inspection of the ongoing crisis at a macro level and a substantial information reference for policymakers.

Impact of Brexit news on the stock prices of european insurance companies: an event study approach based on indexation and sub-indexation

The Brexit referendum in June 2016 led to different publications analysing stock market reactions. This study addresses a research gap, regarding the consideration of other Brexit events and the focus on stock prices of European insurance companies, by using a further refined event study approach based on indexation and sub-indexation. In scope are 17 listed insurance companies based in the European Union or the United Kingdom represented by the Insurance Index. To analyse potential dependencies between abnormal returns and the location of the company (European Union or United Kingdom) or the share of insurance business written in the United Kingdom, the Insurance Index is divided into four sub-indices. The results show significant positive or negative abnormal returns of the Insurance Index. In addition, the sub-indices react differently to the events under consideration. Trends are suggesting that significant abnormal returns may depend on the location and the share of insurance business written in the United Kingdom.

CEO turnover, political connections, and firm performance: Evidence from China

In our analysis of 5738 CEO turnover events among A-share listed companies in China over the period of 1993 to 2019, we find that CEO turnovers on average hurt companies' market performance with significant negative abnormal returns in the event window. We then group the companies into four types based on whether the outgoing and successor CEOs have political connections, and then calculate the abnormal returns in the event windows of CEO turnovers once announced. We find that companies generally enjoy positive abnormal returns if they replace politically non-connected CEOs with connected ones. Such a positive effect is more evident among non-state-owned enterprises (non-SOEs), companies with worse performance, and companies with higher financial constraints. However, abnormal returns derived from hiring politically connected successor CEOs turn to negative following China's massive anti-corruption campaign in 2012. Our findings provide direct estimations of the economic value of CEOs' political connections for A-share listed companies in China and reveal boundary conditions that moderate the influence of hiring politically connected CEOs.

On the importance of fiscal space: Evidence from short sellers during the COVID-19 pandemic

Using the exogenous shock of the COVID-19 pandemic, we study how informed market participants incorporate fiscal space into their trading decisions. At the onset of the pandemic, short-selling activity shifted towards companies with low financial flexibility but only in countries with limited fiscal space. Among such companies, short sellers specifically targeted those that generate their revenues mainly in the domestic market. These short sellers entered their positions before the market crash, thereby generating significant abnormal returns. We find no evidence of either herding behavior prior to the market crash or a long-run performance reversal of short sellers. These findings support the notion that short sellers help to promote price efficiency in times of crisis, where governments with budgetary constraints are unable to provide sufficient stimuli to their economies.

The impact of GDPR infringement fines on the market value of firms

PurposeThis paper aims to investigate the impact of the General Data Protection Regulation (GDPR) infringement fine announcements on the market value of mostly European publicly listed companies with a view to reinforcing the importance of data privacy compliance, thereby informing cyber security investment strategies for organisations.Design/methodology/approachPrevious studies have shown (varying degrees of) evidence of a negative impact of data breach announcements on the share price of publicly listed companies. Following on from this research, further studies have been carried out in assessing the economic impact of the introduction of legislation in this area to encourage firms to invest in cyber security and protect the privacy of data subjects. Existing research has been predominantly US centric.FindingsUsing event study techniques, a data set of 25 GDPR fine announcement events was analysed, and statistically significant cumulative abnormal returns of around 1% on average up to three days after the event were identified. In almost all cases, this negative economic impact on market value far outweighed the monetary value of the fine itself, and relatively minor fines could result in major market valuation losses for companies, even those having large market capitalisations.Originality/valueThis research would be of benefit to business management, practitioners of cyber security, investors and shareholders as well as researchers in cyber security or related fields (pointers to future research are given). Data protection authorities may also find this work of interest.

The impact of ESG on financial performance: a revisit with a regression discontinuity approach

This study revisits the question of “whether firms are doing well by doing good?”. We examine shareholders-sponsored corporate socially responsible (CSR) proposals related to Environmental, Social, and Governance (ESG) that are voted to pass or fail by a small margin. The adoption of those “close call” proposals is regarded as equivalent to a random assignment of CSR policies and, therefore, provides a quasi-experimental setting to capture the causal influence of CSR on firm performance. We apply the regression discontinuity design (RDD) and find that CSR proposals’ passage leads to a significant positive abnormal return on the voting day. The results are robust with both parametric and nonparametric approaches of RDD and different polynomial orders. However, we fail to identify a significant change in financial performance in the long-term. One possible reason is that passing a CSR proposal could be symbolic, rather than substantial.

The impact of governmental COVID‐19 measures on manufacturers' stock market valuations: The role of labor intensity and operational slack

This study investigates the impact of the Chinese government's Level I emergency response policy on manufacturers' stock market values. We empirically examine the roles of human resource dependence (labor intensity) and operational slack within the context of supply chain resilience. Through an event study of 1357 Chinese manufacturing companies, we find that the government's emergency response policy triggered statistically significant positive abnormal returns for manufacturers. However, we also find that there exists a negative impact on abnormal returns for manufacturers that are labor‐intensive, giving rise to arguments based in resource dependence theory. In addition, the results indicate the positive role played by operational slack (e.g., financial and inventory slack) in helping manufacturers maintain operations and business continuity, effectively mitigating risks and adding to the manufacturers' resilience. With these findings, we contribute to operations and supply chain management by calling attention to the importance of human resource redundancy while at the same time identifying financial slack and inventory as supply chain resilience strategies that were able to mitigate pandemic‐related risks.

Analyst target price and dividend forecasts and expected stock returns

This paper examines whether adding expected dividend yields implied by analyst dividend forecasts to expected capital gains implied by analyst target prices improves the portfolio strategy of buying stocks with the highest expected returns and selling stocks with the lowest expected returns. We find that the strategy based on the expected total returns performs only slightly better at the 1-month horizon because the short-term return predictability of the expected dividend yield is weak. We find that the strategy generates significant abnormal returns regardless of sorting the stocks universally or within industries, although sorting stocks within industries improves the performance.

REAKSI PASAR TERHADAP KEMENANGAN JOE BIDEN DALAM PEMILIHAN UMUM PRESIDEN AMERIKA SERIKAT TAHUN 2020 DI EMERGING MARKET

This study aims to determine the market reaction to the events of Joe Biden's victory in the United States presidential election in 2020, especially in the emerging market, namely Indonesia and the Philippines. This research uses an event study approach with a 11 day event window. The research sample is based on purposive sampling as many as 22 multinational companies that are members of the LQ45 Index, and 14 multinational companies that are members of the PSE Composite Index. The hypothesis test used in this research is One Sample t-test and Paired Sample t-test. The results of this study indicate (1) There is a market reaction in the form of significant abnormal returns around events in Indonesia and the Philippines (2) There is no difference in abnormal returns before and after events, both in Indonesia and the Philippines. The results of this study can show that the capital market in Indonesia and the Philippines can be in the form of an informational semi-strong form of efficiency market. The results of this study can be used as a consideration for investors in calculating the risk of non-economic issues that affect the capital market.

REAKSI PASAR TERHADAP PENAWARAN SUKUK DAN OBLIGASI DI BURSA EFEK INDONESIA

The aim of this research is to examine the market reaction to the offering of Sukuk and bonds. Testing the market reaction is done by looking at the presence or absence of significant abnormal returns before and after the offer date as well as a comparison of the market reaction to the offering of Sukuk and bonds. This research used the event study method. The population of this study were all publicly traded companies that had been and are still actively listed on the Indonesia Stock Exchange (IDX) for the 2012-2015 period. The sample selection technique used purposive sampling method and obtained as many as 54 issuers offering bonds and 9 Sukuk issuers. Based on the results of statistical testing with a one-sample t-test around the offering date of Sukuk and bonds, it showed that there was an insignificant average abnormal return (AAR). It can be concluded that there was no significant market reaction around the date of offering Sukuk and bonds.

Merger as Strategic Partnership to Support SDG: A Positive Signal for Investors in Stock Market of APEC Member Countries

A merger is one of the strategic partnerships undertaken by a firm to pursue future growth and sustainability. Merger information signals a firm’s prospects to investors in the stock market. The present study examines investors’ reactions toward merger announcements under the different payment methods. The sample comprised 115 firms from the member countries of the Asia-Pacific Economic Cooperation (APEC) that announced a merger between 2014 and 2018. The study employed the event study to test whether the bidding firm generates abnormal returns during the time surrounding the merger announcement and evaluate the differences in the returns between cash and stock payment of the merger. The results revealed that cash payment earned a significantly higher abnormal return post- than the pre-merger announcement, while there was no significant abnormal return for the period of pre- compared to the post-merger announcement in stock payment. Additionally, cash payments generated significantly higher cumulative average abnormal returns than stock payments. These findings imply that investors’ sentiments respond more positively to cash financing. The study confirms the signaling theory in which a firm action announcement conveys information to investors in the stock market.
 Keywords: merger, event-study, APEC, sustainability