Cash Reserve, CEO Health Risk, The Price Reaction Due to COVID-19 First Announcement on Leisure Industry
Muhammad Afif arsyad- Cynthia Afriani Utama

University of Indonesia

Abstract

This study investigates stock market reaction on leisure industries to first announcement of COVID-19 case which affected Indonesia on 2nd March 2020. The research method used is an event study and supported by multiple linear regression to analyze the relationship between market reaction and independent variables. This paper uses Fama French three factor models to estimate expected return on firms due to COVID-19 announcement. Based on a calculation of Cumulative abnormal returns, the stock of tourism industries has a more negative reaction towards a confirmed first case of COVID-19 compared to other industries. We also find that Indonesian firms with greater cash reserves and higher market-to-book ratios experienced less negative returns. Additionally, we don^t find that firms with CEOs who were exposed to significant health risks from COVID-19 experienced worse stock market performances.

Keywords: COVID-19, Cash Reserve, CEO Health Risk, Event Study, Fama-French Three-Factor Model, Finance

Topic: Corporate Finance