Market Reaction to Corporate Action on the Indonesia Stock Exchange before and during the Covid-19 Pandemic M. Alief R. Romadhoni
Department of Management, Faculty of Economics and Business, University of Indonesia
m.alief01[at]ui.ac.id
Abstract
The Covid-19 Pandemic, which began in 2020, had a substantial influence on the global economy, particularly in Indonesia^s capital market, which plunged by 38.24% from January to March 2020. On the one hand, the number of new investors on the Indonesia Stock Exchange increased by 56.21 percent in 2020 and 92.99 percent in 2021, notwithstanding the current crisis. The reaction of the general market to an announcement will undoubtedly be influenced by crisis conditions and the arrival of a large number of new investors. The aim of this research is to look at how the Indonesia Stock Exchange responded to corporate activity before and during the COVID-19 outbreak. This study used the event study approach with a 31-day event window (-15, 0, +15), which was applied to 1081 corporate action, including dividend, rights issues, and stock splits. Market reactions to dividend and rights issues announcements varied significantly, according to the author. During the pandemic, significant CAAR movements happened before the official announcement of corporate action, demonstrating the power of insiders who leaked information to a specific set of investors. Significant market reaction to the rights issue announcement occurred up to 9 days after the announcement of the corporate action, as opposed to the customary period of only one day. Stock splits, unlike other corporate moves, follow a very consistent pattern before and after the Covid-19 pandemic. Individual investors should consider this research when making investment decisions in the event of a corporate action during a crisis.
Keywords: Abnormal Return, Corporate Action, Covid-19, Event Study
