To gain the benefit value in stock investment, it is important for investor to
do further analysis about all informations that can influence the stock price
movement. Those related informations can be in form of internal or external
factor of industry/company. This study analyze one of external factor, that is
minimum wage increases. Minimun wage increases potentially reduce the ability
of a company to gain revenue, especially the industrial sector that has
dependency to direct labor, such as manufacture, agriculture, hotel, restaurant,
construction, etc
To represent real condition, this study takes stocks sample of selected
manufacture stocks located in West java province with manufacture index market
as its market index. There are selected 23 stocks that meet the requirements,
where the event window is at the time of minimum wage increases in west java
province for 2012, as appointed on November 21st 2011. For the calculation of
expected return, This study uses market model method that run in two phases, that
is, generate expectation model with actual return data during the estimated period,
and use the generated model to estimate expected return during the event window.
As the abnormal return calculation is obtained from the expected return
calculation and conduct a test of its significance.
The result of this study shows that market reaction emerge as the impact
of 2012 minimum wage increases event. It's shown from the abnormal return that
significantly affects stock price during the period of appointed and announcement
of minimum wage increase event. The average abnormal return on t-2 with
significant value at 10%, indicates the information leak between investors. The
Average abnormal return at time of announcement (t0) and its significance at 5%,
shows that market reacts fast toward the event. The length time of market reaction
toward this event, which shown by the significant abnormal return at day t+6,
shows that the market is in semi strong efficiency form
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