Moreover, Goodell this case, the author will confirm the impact of the pandemic states that the banking sector would be vulnerable if an on existing sectors and how it will affect the market return. Moreover, market reactions will deeply analysis, and conclusions will be presented in the next section. The spread of this infectious disease not only affects 2. Methods the health and life of the community but also the health of the economy Liu et al. The results of this research To answer the stated research objectives, the event study show that stock markets across the globe have experienced is used to determine the market return before and after the a rapid weakening, and the occurrence of negative abnormal COVID outbreak.
An event study is an empirical analysis returns, confirming pessimistic investor sentiment. This that examines the impact of a significant catalyst occurrence is aligned with Al-Awadhi et al. Event studies can reveal important information about returns. The stages of its This COVID pandemic is a new issue that has use are as follows: 1 determine the sample of companies increased risk and uncertainty for investors.
Elton et al. Therefore, the movement of stock prices on the Indonesia Stock Exchange is something that is important to note from 3. The following is share price on the Indonesia Stock The time period that will be used in this research is Exchange starting from March 2, , until April 24, , 30 days, which is designed to be 30 days before the event which is illustrated as follows.
OLS chooses the parameters of a linear the day estimation period. According to Zoogah , in determining stock differences between the observed dependent variable values returns when events do not or have not occurred, the market of the variable being observed in the given dataset and those model considers changes in the market and stock returns as predicted by the linear function.
In confirming the impact of an adjustment to risk. Based on the statement by Panayides COVID on market returns with abnormal returns, in this and Gong , the estimated value of the beta and the study Ordinary Least Square OLS will be used with the realization of market returns obtained within the window following equation, referring to the adjusted research of Liu period, and the expected level of stock returns can be et al.
The highest stock return value on Panel B, 0. The average stock returns on panels A and B have similar values, and the maximum value on Panel B is greater than Panel A. Based types of industries on the day of the event show abnormal on a study by Bank Indonesia, if the spread of the pandemic negative returns while other sectors are positive. This shows continues, corporate and household performance will decline that there was a negative sentiment from investors in those more deeply due to the spread that occurs in various sectors, sectors over the announcement of the outbreak in Indonesia.
COVID pandemic. Unlike the first day after the event, The agriculture, infrastructure, utilities, and transportation when the consumer goods and financial industry sectors sectors, as well as various industries, responded immediately continued to show negative sentiment from investors, upon the announcement of the pandemic with increased followed by other industries except the mining industry , investor pessimism, even though it appeared to be only various industries, trade, services, and investments showed temporary.
This is possible because an economic mining, and trade, services, and investment sectors. On the downturn reduces buying interest, and creates difficulties third day after the event, only three sectors had negative in paying for installments.
Based on the data from three days after a cumulative calculation of the average abnormal return of the event, there is still a fluctuation of sentiment from the sample is carried out with the following results: investors concerned with the information obtained.
In Table 4. The average cumulative value in the sample Figure 2 shows the number of abnormal returns in each starting from Day Zero until the 22nd day, shows a mildly sector for 30 days before the event up to 30 days after the significant negative value, whereas from the 23rd to the 30th event. From the graph, it can be seen that the financial, day, the cumulative value of the average abnormal return property, real estate, and construction sectors have abnormal of the sample shows a positive value, though, it is not very return values with a negative tendency, indicating a negative significant.
In Graph 3, the average value of abnormal return sentiment in these sectors, stemming from information about samples tends to increase, though the increase is not large, the outbreak for up to 30 days after the event. A calculation of OLS regression, from the day of the This sector is not affected by the information of a COVID event up to 30 days after, is used to determine the impact—or outbreak in Indonesia. Before tendency toward abnormal returns revealing that despite the the calculation, the classic assumption test is performed information about the COVID pandemic, investors still had for normality, multicollinearity, heteroscedasticity, and positive sentiment regarding the shares owned.
Furthermore, autocorrelation. The results of the normality test show that the CAR Cumulative Abnormal Return calculation is the data used is distributed normally the statistical value performed with the following calculation results: of JB chi-square distribution is smaller than the critical In Table 3, the financial sector was most affected chi-square value of According to the rules, the announcement. The decline was due to the impact correlation coefficient values greater than 0.
This Based on the current test results, there is multicollinearity is consistent with the statement from Bank Indonesia Bank in the relationship between market return and stock returns, Sentral Republik Indonesia , where the widespread while the other variables are free from multicollinearity.
Conclusions stock prices are very closely related to the CSPI. Therefore, this research is still The COVID outbreak in Indonesia turned out to being carried out using previously planned variables. From have an impact on several sectors in the Indonesia Stock the heteroscedasticity and autocorrelation tests that it can be Exchange IDX. The impact is shown by the emergence of said that there is no heteroscedasticity or autocorrelation.
In the next step, the OLS The financial property, real estate, and construction sectors regression calculation is performed with the following results: have shown to have abnormal returns that decreases during Based on the results of Table 5, the stock return variable the day period before and after. The infrastructure, has a probability value of 0. Return M variable also has values. The impact was Table 5 demonstrates that the probability value of due to the decline in exports, production, and economic 0.
Furthermore, the test rates. As it continues, the performance of various sectors shows the adjusted R-squared value of 0. Conversely, the consumer goods that the abnormal return variable can be explained by the and mining industry sectors were still optimistic amid stock return and market return variables To determine the overall impact, a cumulative calculation of The OLS regression test results regarding the relationship the average abnormal return of the sample was performed, between the COVID pandemic and the market return, which showed that the COVID pandemic has had an previously described, demonstrates a negative and impact on stocks on the Indonesia Stock Exchange, with a significant influence on abnormal returns following the news decline as well as negative values occurring during the day announcement.
The results of the study are consistent with of the event until the twenty-second day after the event. This test also confirms the by further testing, which strengthened the relationship findings from the previous event studies. This is because between the COVID pandemic and the significantly perceived investor uncertainty results in negative sentiments negative market returns indicated by the abnormal returns that impact the overall market return. The paid dividend is a residual after all the profitable investment proposals have been financed Hanafi, Companies that are still in their growth stage will require a significant amount of money to expand their business and one source of money to use is profit they have gained.
If the company during its business expansion is using profit, it will reduce the amount of dividend distribution.
According to Bender and Ward , companies at the growth stage tend to set a relatively small dividend payout ratio compared to well-established ones. Several previous studies discuss correlation between GCG and corporate value. Wahab et al. Connelly et al.
Based on the previous studies, it may be concluded that there is a gap between the influence of GCG on corporate value and influence of stock return toward financial performance, and moderating variable is needed to evaluate the influence of GCG on company performance, more particularly stock return and financial performance. This study is basically an extended replication from the previous studies. This study is conducted in public company listed in Indonesian Stock Exchange and LQ45 index between and The companies listed in the LQ45 index were selected as object of the study because their stocks will return and they have good performance and fundamental blue chips stock.
LQ45 index consists of 45 stocks selected based on several criteria and therefore, these stocks have high liquidity, market capacity, future prospect and financial condition. In addition, the companies listed in LQ45 index work in various different sectors that represent all companies listed in Indonesian Stock Exchange.
Agency theory is applied in work contract that will regulate proportion of rights and obligations of each party while still taking into account the overall benefit. A work contract is a set of rules governing profit-sharing mechanisms, whether in the form of profits, returns or risks approved by principals and agents. The limitation of the agency theory is that the theory discusses relationship between managers, owners of companies and creditors of companies in a complex environment which demands connection between various parties including employees, society and government only.
Stakeholders are individuals other than owner of a company and creditors who are involved in both internal and external environment of the companies such as employees, community and the government.
The concept of GCG that discusses a wider range of relationships between managers and all interested parties emerges to control a company Arifin, La Porta et al. In developing countries, ownership structures tend to be concentrated where conflicts of interest between majority and minority owners occur. These conflicts of interest happen due to different interests and power imbalances resulting in the exploitation and imbalance of system Syahroza, Related to the agency problems, the concept of GCG is expected to become instrument to convince investors that they will gain return from their investment.
Shleifer and Vishny stated that GCG focuses on how investors control managers to provide profits and behave honestly in corporate resources management. Messier et al. Types of return investors expected are dividends and capital gains, and according to the residual theory of dividend, company sets dividend policy after all profitable investments are financed. Residual dividend policy thus pays dividends only if there is some amount of money left after the company marks all proposed investments that have a positive NPV only investment policies affecting Corporate Value.
This residual dividend theory is supported by Bender and Ward, who stated that companies in the growth stage tend to establish a relatively small dividend policy compared to more established companies.
Demand and offer are two elements affecting stock price. These elements are also affected by both rational and irrational variables. Examples of the rational variables are financial performance, interest level, inflation, growth level, foreign exchange rate or price of stock from other countries, while examples of the irrational variables are market rumor, peer suggestion, or dream. In general, increase and decrease of stock price occur at the same time and these will result in reverse flow when it continues for days.
It proves that some errors cause an increase or decrease in stock price. When price of stock keeps increasing, it will crash in the following period. Overreaction means feeling too optimistic or pesimistic about certain event that is predicted to have an influence on performance of company in the future.
It accelerates increasing or decreasing stock price that leads to mispricing in certain period. Thus, investor should take into account sharp increase or decline of stock price. The index is issued by Indonesia Stock Exchange. Increasing composite stock price index does not necessarily mean that prices of all types of stocks are going up and, at the same time, decline in the composite stock price index does not mean that prices of all types of stocks listed on the stock exchange have decreased.
The composite stock price index is a reflection of stock price fluctuation that is represented in number and is based on a certain basic rate.
The basic rate is the initial index number before the market figure is formed. It is established by each stock exchange, as well as market price when the stock price index changes for the first time, either above or below the basic rate.
The composite stock price index will change as stock prices in the market change. The share price index may also change due to change in the total value of basic stock rate.
Signaling theory discusses which types of signal company should give to financial report users or types of information managers should provide for owners of the company. The signal is in the form of GCG, stock return, financial performance, corporate value or other information that shows competitive advantage of a company over other companies. Objective of signaling is to eliminate asymmetric information.
Asymmetric information indicates that some individuals in a company, such as management, generally have more complete information about condition, plan and future prospect of the company than other individuals such as investor, creditor and the government, who use particular indicators or facilities to evaluate the quality of the company Gumanti, Untuk memastikan pihak-pihak yang berkepentingan meyakini akan keandalan informasi keuangan yang disampaikan pihak perusahaan, diperlukan opini dari pihak luar bebas memberikan pendapat tentang laporan keuangan suatu perusahaan.
Companies with lucrative prospects will try to avoid sale of shares and strive for any new capital required in other ways, such as utilizing debt that exceeds targeted capital structure. Companies with less favorable outlooks will tend to sell their shares. If a company offers new share sales more often than usual, then its stock price will go down, because it gives a negative signal which then can suppress its stock price even if the company prospects are bright.
The signaling theory suggests that a good quality company will deliberately signal the market, thus the market is expected to be able to distinguish between good and bad quality companies. Effective signal is one that market can capture and has good perception, and not easily imitated by poor quality companies. A good quality company is demonstrated through GCG. This company will then give signal by reporting its financial statements along with information about governance achieved by the company in certain period of time in a timely manner.
The signal given by a good quality company is considered as a good news, whereas the signal given by a poor quality company is considered as a bad news Figure 1. This study has 3 hypotheses. The hypotheses and their underlying theories including previous empirical research are discussed in the following sections. Agency theory is a theory that discusses how much influence GCG has on corporate value Jensen and Meckling, The assumption in this study is that company and its owners are two separate entities.
The agency relationship is a contract between one or more persons as owner with another person as an agent to act in the interests of the owner, including delegating decision-making authority to agent in order to maximize corporate value. If both parties owners and agents have a conflict of interest, where the agent does not always act in the best interests of the owner, this conflict can be minimized through agency costs, i.
Fallatah and Dickins observed the influence of corporate governance on firm value. The finding showed that the corporate governance had an influence on the firm value. Wahyu also analyzed the influence of corporate governance on firm value. The finding showed that the corporate governance had a significant, positive influence on the firm value. Jauhar conducted another study that observed the influence of corporate governance on firm value. The finding showed that the corporate governance had a significant, negative influence on the firm value.
Yulianto evaluated the influence of GCG on corporate value. The finding showed that GCG had a significant positive influence on corporate value. Having reviewed the related theories and previous studies, it can be concluded that GCG had a significant influence on corporate value. Therefore, the first hypothesis proposed in this study states: H1. GCG had a significant influence on corporate value. The bird in hand theory Gordon, ; Lintner, , a theory that claims the influence of stock return toward corporate value, states that dividend policy will increase corporate value due to uncertainty in cash flow company in the future making dividend more interested for investor than capital gains.
Some previous studies have discussed the effect of stock return on corporate value, for example Huang et al. The general conclusion from this theory and previous studies is that stock return has a significant influence on corporate value. Therefore, the second hypothesis proposed in this study states: H2. Stock return is moderating variable in the influence of GCG on corporate value. Information about financial performance is one type of signal company may send.
For go public companies, corporate value is reflected in its share price. Previous researchers have shown the influence of financial performance on corporate value. Fallatah and Dickins conducted a study that analyzed the effect of firm performance on firm value. The finding indicated that the firm performance had influence on firm value. Wahyu observed the influence of financial performance on firm value. The finding showed that financial performance had a significant, positive influence on firm value.
Jauhar also analyzed the influence of financial performance on firm value. Marius et al. The finding showed that in large companies with a lot of assets, financial performance had a significant, positive influence on corporate value. Therefore, general conclusion from the theories and previous studies was that financial performance had a significant influence on corporate value.
Therefore, the third hypothesis proposed in this study states: H3. Financial performance is a moderating variable in the influence of GCG on corporate value.
Research is a planned and systematic process to solve particular issues or answer a set of research questions. The criteria were: companies listed in LQ45 Index between and ; companies that published their financial report between and ; companies that shared their dividend between and ; companies that implemented the principles of GCG. In this study, GCG was measured based on four indicators namely independent commissioner proportion, institutional ownership, managerial ownership and public ownership; indicators of stock return were abnormal return and dividend yields indicators of financial performance were free cash flow, return on asset and ROE indicators of corporate value were market to book value of equity and price earning ratio.
The analysis instrument was WarpPLS involving structural model and moderating variable Solimun et al. H1 was rejected with coefficient line of 0. Direction of the influence of good coporate governance on corporate value was positive that meant higher GCG independent commissioners proportion, institutional, managerial and public ownerships resulted in higher corporate value MBE and PER. It was in line with the theories and previous studies, the bases for the hypothesis Figure 2.
Based on theoretical-academic theory, corporate governance is derived from separation between shareholders and management. Independent commissioner board shareholders appointed to supervise and advise company have yet to work effectively since the board has very little managerial ownership and is unable to balance corporate value-oriented interests.
Morck et al. The finding of this study confirmed findings of the previous studies on the influence of GCG on corporate value. In addition, Wahyu described that corporate governance had a positive influence on firm value. H2 was accepted with coefficient line of 0. The higher the stock was, the stronger the influence of GCG on corporate value. The finding of this study supported the agency theory which states that GCG should have had influence on stock return abnormal return and dividend yield.
The finding of this study also confirmed findings of the previous studies that showed the influence of GCG on stock return. Brammer et al. Erkens et al. Fuenzalida, Mongrut, Artega, Erausquin study showed the opposite, claiming that the companies listed in GCG index had positive abnormal return.
In addition, Rani et al. The bird in the hand theory Gordon, ; Lintner, , stating that dividend policy will increase corporate value due to uncertain cash flow in the future, is a suitable theory to discuss the influence of stock return on corporate value. Stock price tends to increase when dividend is higher and at the opposite, stock price tends to decrease when dividend is low Hanafi, Corporate value of go public companies is represented in their stock price.
Dividend signaling theory states that change in dividend is a signal that future prospect of company is changing. Decreasing dividend by investor is categorized as bad news because it means company is in bad condition resulting in decreasing stock price. At the opposite, increasing dividend by company to shareholders is good news because it means future prospect of a company is getting better, resulting in positive response from investors and increasing stock price.
High dividend also means that a company has high profitability level cash flow signaling hypothesis. Besides that, company that pays dividend to shareholders has low risk.
Papadopoulos and Charalambidis stated that dividend represented not only future prospect of a company but also instrument to increase stock price. The finding of this study is in line with that of the previous related studies. Researchers have proven the influence of stock return on corporate value empirically.
Akhigbe et al. Johnson, Moorman and Sorescu described that stock return had a significant influence on corporate value. H3 , financial performance is a moderating variable in the influence of GCG on corporate value, was accepted with coefficient line of 0. Easterbrook argued that there are more affordable methods companies may choose to give signal to investors, for example, publishing announcement about prospect and ability of companies to create profit by hiring individuals or organizations outside the companies to analyze their financial reports and give opinion whether or not their managers have run the companies well.
Separated function between management and shareholders is the foundation of the agency theory proposed by Jensen and Meckling When they have conflict of interests, in which managers may sometimes take actions shareholders disagree upon, agency cost should minimize this conflict using total of supervising cost by owners through commissioner board, institutional ownership and public ownership as instrument, mechanism and structure used to evaluate managerial behavior that benefits managers themselves self-serving.
Objective of evaluating the self-serving behavior is to increase efficiency and eventually improve financial performance of a company. However, in practice, appointed independent commissioners responsible for supervision and giving advice are unable to carry out their responsibility optimally. Therefore, good financial performance is a signal that a company has ability to increase its corporate value. The finding also confirms findings of several previous studies particularly one discussing the influence of financial performance on corporate value.
The finding of Varaiya et al. The argument indicates how important managerial ownership is in ownership structure of a company. The finding of this study revealed that managerial ownership was very limited. Having observed 22 companies, only 6 companies allow their managers become shareholders.
These managers own less than 1 percent of stock in the companies where they work; second, public ownership is an indicator of good corporate governace that represents public trust toward a company. Public trust has massive influence on company performance. Based on the data, the percentage of public ownership was However, this percentage does not represent any relationship with GCG. Based on the finding and limitation of the study, future researchers are expected to: conduct similar study while involving other exogenous variables such as intellectual capital and financial psychology.
This study used one exogenous variable only GCG ; observed several types of industry and made comparison between companies that apply the principles of GCG and those which do not. Based on the discussions, the researchers propose some recommendations for management, investors and the government: first, management is expected to carry out the principles of GCG consistently, high fluctuation of stock price results in higher risk and decreasing public trust.
Therefore, the management should make careful observation on the current stock price. Second, investors are expected to depend upon dividend rather than capital gain because predicting the future is quite a challenge, take into account how much dividend company will pay and capital gain as well as conduct analysis on financial performance of a company.
Third, some suggestions for the government are framework of GCG should guarantee there is strategic guidance for a company as well as accountability of board of commissioners toward shareholders and that board of commissioners conduct effective supervision on management; there is urgency for ownership structure because institutional shareholders may result in opportunistic behavior due to the act of collusion between the board of commissioners and the management.
Abdullah , R. Akhigbe , A. Alwy , A. Ammann , M. Anderson , A. Arthur , C. Bae , J. Baek , J. Barnhart , S. Bauer , M. Bauer , R. Bender , R.
0コメント