Title: ANALYSIS OF MARKET REACTION TO THE ANNOUNCEMENT OF DIVIDEND CUT POLICY ON THE JAKARTA STOCK EXCHANGE (EMPIRICAL STUDY ON THE JAKARTA STOCK EXCHANGE 1994 – 1997 PERIOD)

Authors: AGUS SUKARNO

Item Type : Thesis (Thesis)

Affiliations: Master of Management Study Program, Faculty of Economics and Business, Universitas Airlangga , Surabaya, Indonesia

Publisher: Universitas Airlangga

Abstract

This study examines the market reaction to the dividend cut policy on the Jakarta Stock Exchange during the 1994-1997 period. By selecting a sampling criterion of companies that have paid dividends consistently for at least two years and then cut their dividends, 51 companies were selected as samples. The proxy used for market reaction to the dividend cut policy is Abnormal Return. This study uses the t-test model and prior regression. Event Study is used to observe the market reaction to the dividend cut policy. Meanwhile, the Multiple Regression model is used to observe the influence of company characteristic variables on the Abnormal Return received by investors at the time of the dividend cut policy. The Event Study was conducted using the Single Index Market Modification technique to estimate expected returns. The test results showed a negative and significant Abnormal Return at the time of the event. This evidence shows that the market reacted negatively to the dividend cut policy, or in other words, investors still received a positive Abnormal Return from the Jakarta Stock Exchange's dividend cut policy. Testing with multiple linear regression models was conducted using Abnormal Return as the dependent variable with eight independent variables. The independent variables used in the model were the percentage of dividend reduction (percentage), company size (size), and the percentage of dividend reduction (percentage). Stock risk (Beta), stock performance (Carm), variation in earning patterns (resvar), and two dummy variables, namely the presence or absence of previous earnings reduction announcements (iprev) and the presence or absence of stock dividend distributions along with dividend cuts (5Ikdiv). The results of the multiple linear analysis test showed five significant independent variables, namely company size (size), stock performance (C8nn), variation in earning patterns (resvar), previous earnings reduction announcements (iprev), the co-occurrence of stock dividend announcements with dividend reduction announcements (stl).

Keywords: ANALYSIS OF MARKET REACTION TO THE ANNOUNCEMENT OF DIVIDEND CUT POLICY ON THE JAKARTA STOCK EXCHANGE (EMPIRICAL STUDY ON THE JAKARTA STOCK EXCHANGE 1994 – 1997 PERIOD)

Sources: http://repository.unair.ac.id/85207/