BANKRUPTCY RISK AND MARKET REACTION TO CAPITAL EXPENDITURE

This study aims to examine whether the condition of the bankruptcy risk of a company will influence the market response to capital expenditure. The main hypothesis of this research is the positive market reaction to the level of capital expenditure issued will be different in companies with a high level of bankruptcy risk and companies with low bankruptcy risk. The study was conducted on 56 companies with large capitalization on the Indonesia Stock Exchange for the period 2018-2021. The results of hypothesis testing indicate that the market responds positively to capital expenditures and the companys bankruptcy risk conditions. In addition, it is proven that in companies that are at risk of bankruptcy, the market reacts positively to capital expenditures made by companies, while in companies that are not in a state of bankruptcy, the market does not respond to capital expenditures made by companies. The results of this study are expected to be used by market participants when they analyze the information on capital expenditures made by the company

Market Reaction to Capital Expenditure: Evidence from Company in Bankruptcy Risk

Objective - This study aims to examine whether the condition of the bankruptcy risk of a company will influence the market response to capital expenditure. The main hypothesis of this research is that the positive market reaction to the level of capital expenditure issued will be different in companies with a high level of bankruptcy risk and companies with low bankruptcy risk. Methodology/Technique �The study was conducted on 56 companies with large capitalization on the Indonesia Stock Exchange for 2018-2021. Findings - The results of hypothesis testing indicate that the market responds positively to capital expenditures and the companys bankruptcy risk conditions. In addition, it is proven that in companies at risk of bankruptcy, the market reacts positively to capital expenditures made by companies. In contrast, in companies that are not in a state of bankruptcy, the market does not respond to capital expenditures made by companies. The results of this study are expected to be used by market participants when they analyze the information on capital expenditures made by the company. Novelty - This study contributes to the literature by providing empirical evidence which explores a company�s bankruptcy risk as the unique factor that affects the relationship between capital expenditure and market respons

Earnings Management Through Foreign Currency Transactions on Companies Listed on Indonesia Stock Exchange

This research aims to examine whether the condition of Rupiah currency, the magnitude of monetary liabilities in foreign currencies, and the condition of operating profit affects the management�s aggressiveness to perform earnings management through foreign exchange gain or loss (FEGL) post. This research was conducted on 258 companies listed on the BEI in 2009 to 2015. This research was successfully proved on earnings management through foreign currency transactions phenomenon for several conditions. First, in the condition of Rupiah appreciation, the managers that have monetary liabilities in foreign currency are less than the monetary assets in foreign currency are more daring to make earnings management through FEGL post than companies that have monetary liabilities in foreign currency greater than monetary assets in foreign currency. Second, managers of companies that decreasing in operating profit, more daring to make earnings management through FEGL post than companies that experience an increase in operating profit. Under the depreciation of the Rupiah, the managers of companies with monetary liabilities in foreign currency are less than monetary assets in foreign currency, are more aggressive to perform earnings than the managers of companies who have monetary liabilities denominated in foreign currency greater than the monetary assets in foreign currency

Market response and future performance of inefficient investment: Over-investment or under-investment

There have been many studies on the market response to investment spending, but only a few have examined the market response to the issue of over-investment or under-investment. This study examines the effect of the issue on market response and future financial performance. The sample includes large-cap companies listed on the Indonesia Stock Exchange (IDX) for 2016–2021. Samples must have at least 120 active trading days for each year. Two hundred and thirty-two observations meet the qualifications. This study adopts the investment inefficiency model developed by previous studies to measure over-investment or under-investment. Residual inefficient investment models are used as over-investment or under-investment scores, in addition to the dummy of the residual category. Market response is measured by cumulative abnormal returns (CAR), market capitalization (MCAP), and market-to-book value (MTB). Meanwhile, a firm’s performance uses return on assets (ROA) and return on equity (ROE). The results show that the coefficient of the inefficient investment variable, using both the residual value and the dummy variable, shows a negative direction, which means the market responds negatively to over-investment or under-investment. However, the value of t is significant at the <0.01 level on the market response variable as measured by MTB, but not significant for the other two proxies. Thus, hypothesis 1 is supported, although not for all market response proxies. The value of the inefficient investment coefficient also shows a negative direction when testing hypothesis 2 and is significant at the <0.1 level. These results are consistent with future performance variables measured by ROA and ROE

The Effect of Sales Growth and Independent Commissioner’s Supervision on Financial Performance: The Moderating Role of Corporate Social Responsibility

Various studies on sales growth and supervision of independent commissioners on financial performance have been carried out and based on agency theory. Agency theory explains that agents must act following the principals wishes. Sales growth and supervision of independent commissioners are needed to improve financial performance to meet the principals wishes. On the other hand, stakeholder theory explains that it is not enough for companies only to fulfill the principals wishes but must also pay attention to stakeholders interests. The company can realize its concern for stakeholders through Corporate Social Responsibility (CSR) activities. Based on these two theoretical perspectives, the researchers conducted this study to examine whether CSR activities can affect the relationship between sales growth and independent commissioners supervision on financial performance. The study was conducted on 59 manufacturing companies listed on the IDX (Indonesian Stock Exchange) for 2018-2020. This study uses multiple linear regression panel data. The study results prove that the higher the sales growth and the supervision of independent commissioners, the higher the financial performance. Related to the moderating role of CSR, it is proved that the increase in financial performance due to increased sales growth will weaken in companies with extensive CSR activities. Furthermore, significant CSR activities can strengthen the independent commissioners supervisory relationship to financial performance. The results of this study are expected to be used by the management of growing companies to be more careful in carrying out CSR activities. In addition, researchers suggest that companies with high independent commissioner supervision carry out many CSR activities

PENGARUH PENGUNGKAPAN CORPORATE SOCIAL RESPONSIBILITY TERHADAP ABNORMAL RETURN

Penelitian ini bertujuan mengetahui pengaruh pengungkapan corporate social responsibility (CSR) terhadap abnormal return. Penelitian ini menggunakan variabel kontrol return on equity (ROE) dan price to book value (PBV). Pengukuran pengungkapan CSR didasarkan pada Global Reporting Initiative (GRI). Sedangkan, abnormal return dihitung dengan menggunakan market adjusted model. Penelitian dilakukan terhadap laporan tahunan 40 perusahaan sumber daya alam yang terdaftar di Bursa Efek Indonesia pada tahun 2007-2009. Hasil penelitian menunjukkan bahwa pengungkapan CSR berpengaruh signifikan terhadap abnormal return yang menandakan bahwa investor mempertimbangkan informasi CSR untuk membuat keputusan. Variabel kontrol ROE berpengaruh signifikan negatif terhadap abnormal return. Sedangkan, Variabel kontrol PBV tidak berpengaruh signifikan terhadap abnormal return. Kata kunci: pengungkapan corporate social responsibility, abnormal retur

Corporate Social Responsibility dan Firm Value: Peran Mediasi Profitabilitas (Studi Pada Subsektor Industri Barang Konsumsi)

Corporate Social Responsibility (CSR) is currently become one of the most important factors in the company, so many companies have implemented CSR activities. However, there are still many companies that are not consistent with their implementation and not taking it seriously. Thus, the benefits of the activities can not be conveyed optimally and investors can not assess the company properly. Based on these problems, the motivation of this research is to see whether CSR has an influence on Firm Value through Profitability. The reason for adding Profitability as a mediation variable is because Profitability is one of the factors in calculating company&#65533;s profit, which is also an indicator for investors in measuring whether the companies are good or not. The researcher hopes that through this research, it can contribute to other studies that are related with mediating role of Profitability towards CSR and FV. Population in this study are manufacturing companies in the consumer goods industry sub-sector listed on the IDX during 2016-2019. The sampling technique used is purposive sampling method which obtained 104 companies and data analysis technique used is Partial Least Square (PLS) with SmartPLS application. The results show that CSR has a significant positive effect on FV and also the Profitability is proven to mediate CSR and FV

The Effect of CEO Compensation on Earnings Management: Is It Affected by Leverage Condition? Proving the Prospect Theory

The connection between CEO compensation and earnings management has long become the object of research, ever since a study by Healy in 1985. Generally, the study on earnings management would use agency theory. Still, this study applies prospect theory which serves to explain the behavior of people or organizations when making decisions in a high-risk, uncertain situation. An organization suffering from loss will attempt to take risk, while an organization enjoying a gain will be averse to risk. A company with high leverage is in an unfavorable position compared to one with low leverage. Leverage describes a company’s debt situation. The more debt there is, the more obligations the company must fulfill, such as profit numbers. It is then presumed to be the cause for CEO to start managing earnings. This study aimed to prove if leverage condition also influences the relation between CEO compensation and earnings management. The study was done on 217 non-financial companies listed in Indonesia Stock Exchange (IDX) in 2019 and 2020. The data analysis technique utilized panel data regression with the program Gretl. This study prove that the more compensation a CEO receives, the less inclined they are to do earnings management. However, in companies with high leverage, this correlation weakens, meaning CEOs would be more willing to manage earnings. The results of this study are expected to help shareholders in deciding CEO compensation when in a high-leverage conditio

Hubungan kompensasi CEO terhadap manajemen laba: Apakah kondisi pandemi Covid-19 ikut memengaruhi?

The relationship between CEO compensation and earnings management has been studied by the researchers since Healy’s research in 1985. In its development, there are many conditions that can affect this relationship. One of the conditions is the condition of the Covid-19 pandemic. This Co-vid-19 pandemic has a significant role in the economic downturn, which in turn, it could affect the company’s profit target. Profits that do not reach the target may lead the CEOs to do earnings management. This study is aimed to determine the effect of the Covid-19 pandemic on the relationship between CEO compensation and earnings management. Earnings management is measured using discretionary accrual proxy with Modified Jones Model. The study was done on 217 non-financial companies listed in Indonesia Stock Exchange (IDX) in 2019 and 2020. The data analysis technique utilized panel data regression with the program GRETL. This study proved that the more compensation the CEOs receive, the less inclined they are to do earnings management. However, during the Covid-19 pandemic, this relationship tends to weaken, meaning that the CEOs would be more willing to manage earnings. The result of this study is expected to help shareholders in deciding CEO compensation in the midst of a pandemic situation

Profitability, Liquidity, and Firm Value: Does Financial Distress Have a Mediating Effect? (Study of Manufacturing Companies in Indonesia)

Profitability and liquidity are essential factors in investor evaluation. The increased profitability and liquidity value reduces the risk of a company going bankrupt. This study examines the role of financial distress in the relationship between profitability and liquidity. The research looked at 170 industrial companies listed on IDX for 2016-2020. The data were analyzed using PLS (Partial Least Square). Profitability and Firm Value are perfectly mediated by financial distress, with Liquidity as the independent variable. The studys major finding is that profitability and liquidity have no direct impact on firm value, but financial distress does. Signal theory states that information about financial circumstances that are not in financial distress might encourage investors to invest, hence increasing Firm Value. This research contributes to the literature on the impact of Financial Distress in predicting the influence of Profitability and Liquidity on boosting Firm Value