Indonesian capital market condition before and after the announcement of social restriction

Abstract

Purpose: This study aims to know whether the announcement of Large-Scale Social Restriction (PSBB) and Public Activity Restriction (PPKM) in the midst of Covid-19 influence the Indonesian capital market. Methods: Comparative research along with event study is used as the methodology. There are 32 companies taken as a sample study. The data are collected during the event period for 22 days – 11 days for PSBB event period and the other 11 days for PPKM event period. The collected data are analyzed using parametric statistical tests Paired Sample t-Test and One Sample t-Test for normal distributed data, while for the abnormal distributed data; non-parametric statistical test is carried out. Results: The results indicated that there is no difference in the average of abnormal return and transaction volume before and after the event. However, significant abnormal returns occurred after the third day of PSBB announcement (D+3), whereas during PPKM, significant abnormal returns occurred at day two (D-2) and day three (D-3) before and day five (D+5) after the announcement. The trading volume activity also showed that there is a significant transaction volume during the day of social restriction. Conclusion: The market reaction is occurred during the announcement of PSBB and PPKM. Even, they are becoming panic due to high selling pressure during the announcement.

Keywords

• event study
• abnormal return
• transaction volume