The Intra-Industry Spillovers of Indonesian Right Offerings

Abstract

This study aims to examine the spillover effect of right offerings to the industry on the Indonesian Stock Exchange in the period 2009-2016. This study is designed using event study methodology. In total, there are 96 issuing companies (issuers) and 1205 non-issuing companies (non-issuers) used as the sample which was obtained using a purposive sampling technique. The test for information content on the right issues was conducted using standard t-test on the average cumulative abnormal return of issuers and non-issuers in the period t-10 to t+10 around the issuance. The research found positive abnormal returns for issuers in t0 to t+4 but did not confirm the spillover effect to non-issuers over the observed (window) periods. The average cumulative abnormal returns are randomly distributed during the window period. These results confirm the absence of intraindustry effect of right issues on the non-issuers’ performance

Long-Run Underperformance on Seasoned Equity Offerings: An Evidence from Indonesia

“…Using short-time observations, Rafik and Arafah (2019) identified the reversal patterns of issuing firms' returns in Indonesia during 2009-2016. They found significant positive returns in the day 0 to day 4 and the positive returns started to be negative from day 7 to day 10 (day 10 was the maximum length of their window periods).…”

“…The market seems to initially assume that the right issue carries a positive signal but fails to sustain the belief on an ongoing basis. The positive returns in 4 days after the rights issue like Rafik and Arafah (2019) identified can also merely denote the ongoing distribution phase of the rights from the old shareholders to the market.…”

“…Moreover, the performance issues following right offerings in literature are more about the longrun performance of the issuing firms which needs the longer horizons of the observed periods (Dutta, 2017;Lizinska, 2018;Mansali & Daadaa, 2018;Wang, Gao, & Wang, 2015;Young & Wu, 2017). Another Indonesian research regarding SEO is conducted by Rafik and Arafah (2019). Nevertheless, their study focuses on the short run spillover effect of SEO on the non-issuing firms within the industries.…”