Indonesian Capital Market Review
The intent of the Editors of The Indonesian Capital Market Review is to discuss, to explore, and to disseminate the latest issues and developments in Empirical Financial Economics particularly those related to financial frictions in the Emerging Markets. The topics cover capital markets, financial institutions and services, corporate finance, risk modeling and management, market microstructure in financial markets, Islamic finance, behavioral finance, and financial crisis. By submitting your work to the Indonesian Capital Market Review (ICMR), the author(s) automatically agree to transfer the copyright to ICMR, if the submitted paper is accepted for publication.
Articles
146 Documents
<![CDATA[Do Firms Approach the Target Working Capital Requirement? A Case of Pakistan ]]>
<![CDATA[Shaikh, Ruqia]]>;
<![CDATA[Memon, Pervaiz]]>;
<![CDATA[Shaique, Muhammad]]>;
<![CDATA[Hassan, Ehsan ul]]>
<![CDATA[ The Indonesian Capital Market Review Vol. 10, No. 1 ]]>
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<![CDATA[The study investigates the dynamism of working capital requirement (WCR) in non-financial firms listed on Pakistan Stock Exchange from the period of 2007 to 2013. The purpose of this research is to analyze whether firms follow the target WCR, to estimate the speed with which firms adjust towards its target WCR and to investigate the firm specific and macroeconomic determinants of WCR. Difference GMM technique is used to analyze the speed and determinants of WCR to avoid the problems of endogeniety and unobservable heterogeneity. The study gives evidence that there is an existence of target WCR in firms of Pakistan and firm require 1.6 years to completely adjust back to target WCR. The factors which are statistically significant in determination of WCR are: the level of economic activity in the country, operating cash flow, profitability, leverage, financial distress, and financing cost. The WCR is measured by net trade cycle of a firm.]]>
<![CDATA[The High-Low Intraday Performance of Initial Public Offerings during Global Financial Crisis : Evidence from Malaysian Stock Market ]]>
<![CDATA[Leow, Hon-Wei]]>;
<![CDATA[Lau, Wee-Yeap]]>
<![CDATA[ The Indonesian Capital Market Review Vol. 10, No. 1 ]]>
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<![CDATA[This study investigates the high-low intraday Performance of Initial Public Offering (IPO) during Global Financial Crisis (GFC) from January 2006 to December 2011. Models comprise of hierarchical and dummy variable regressions are evaluated. Our results show: Firstly, it can be observed that intraday IPOs performance are generally lower due to the GFC; Secondly, investors receive 7 to 30 percent IPO intraday returns on average in the first trading day of pre-GFC, -5 to 11 percent during GFC, and -4 to 14 percent in the post-GFC; and thirdly, the GFC does not act as a moderator that worsens the relationship between intraday IPO performance and oversubscription ratio. As for implication, this study dispels the notion that investors should totally shun IPO during GFC period as there are still positive intraday returns among the IPOs.]]>
<![CDATA[DCC-GARCH Application in Formulating Dynamic Portfolio between Stocks in the Indonesia Stock Exchange with Gold ]]>
<![CDATA[Robiyanto, Robiyanto]]>
<![CDATA[ The Indonesian Capital Market Review Vol. 10, No. 1 ]]>
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<![CDATA[This study tries to form a portfolio by using a method which may accommodate the dynamic of assets correlation and the abnormality of stock return distribution namely DCC-GARCH. The objective of this study is to combine individual stocks with gold, so retail investor can also apply this method. This study using data from January 2009 –December 2017 period. Samples in this study were nine stocks. The results of this study showed that there were two stocks with higher Sharpe Ratio if combined with gold through dynamic portfolio formation (hedged portfolio) namely BBCA-Gold and SMCB-Gold than unhedged portfolio. And there are three stocks with higher Treynor Ratio if combined with gold through dynamic portfolio formation (hedged portfolio) namely BBCA-Gold, SMCB-Gold and UNTR-Gold than unhedged portfolio. This finding proves that the DCC-GARCH application can improve the risk-adjusted return of these stocks when combined with gold]]>
<![CDATA[Trading Friction and Spread Decomposition in Indonesian Stock Exchange ]]>
<![CDATA[Nurhayati, Immas]]>;
<![CDATA[Ekaputra, Irwan Adi]]>;
<![CDATA[Husodo, Zäafri Ananto]]>
<![CDATA[ The Indonesian Capital Market Review Vol. 10, No. 1 ]]>
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<![CDATA[We examine the intraday trading and price change for frequently traded stocks in Indonesian Stock Exchange. Using bid and ask price, trade price, number of trade, trade volume, we estimate trading friction and spread decomposition. The objective of the estimation is to infer what is the biggest component of trading friction. The result of 50 most frequently traded stocks in the Indonesian Stock Exchange using trading friction estimator conclude that the average trading friction of high market capitalization and the most relatively liquid stocks, scattered in various fractions price is equal to 1% per year, and the highest trading frictions derived from the information and it is consistent with spread decomposition estimator.]]>
<![CDATA[Sensitivity of Liquidity, Investment Decision, and Financial Constraints ]]>
<![CDATA[Hidayat, Riskin]]>;
<![CDATA[Wahyudi, Sugeng]]>;
<![CDATA[Muharam, Harjum]]>
<![CDATA[ The Indonesian Capital Market Review Vol. 10, No. 1 ]]>
Publisher : <![CDATA[UI Scholars Hub ]]>
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<![CDATA[This research aims to test the sensitivity level of liquidity and investment opportunity to investment decision between non-financially and financially constrained firms. The sampleon this research is the firms of Jakarta Islamic Index listed on Indonesia Stock Exchange from period 2011 to 2015. There are 13 sample firms obtained with 65 observations. This research uses moderating regresssion analysis. Independent variable is liquidity and investment opportunity, dependent variable is investment decision, moderating variable is financial constrains, and variable control is debt.This research classifies non financially constrains (NFC) and financial constrains (FC) firms into four steps by observing dividend policy, cash flow, debt (leverage), and investment opportunity. The result of research refers that liquidity and investment opportunity have a positive influence to investment decision. Liquidity is more sensitive to investment decision for financially constrained firms. Investment opportunity is more sensitive to investment decision for non-financially constrained firms. The result of robbusness test using sample of the firms LQ 45 period 2011 to 2015 with 23 sample firms obtained with 115 observations also shows the same result and consistent with sample firms in Jakarta Islamic Index.]]>
<![CDATA[Financial development and total factors productivity channel: Evidence from Africa ]]>
<![CDATA[EZZAHID, Elhadj]]>;
<![CDATA[ELOUAOURTI, Zakaria]]>
<![CDATA[ The Indonesian Capital Market Review Vol. 10, No. 2 ]]>
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<![CDATA[We discuss the link between financial development and economic growth through Total Factor Productivity (TFP) canal in African economies. First, we use a composite index to hierarchize financial development in 40 African countries. Then, we study this relationship by using the methodology of panel data based on the Breusch-Pagan LM Test and Hausman Test, to determine the nature of the specific effect, in a panel of 22 economies. The main results of our study show that the development of the financial sector does not promote total factors productivity in low-income and upper-middle-income countries. For the lower middle-income countries, the Finance-TFP relation- ship is significantly positive. The reforms of African financial systems should be designed and directed to increase the adequacy of financial services with the needs of each economy.]]>
<![CDATA[Cost of Financial Distress and Firm Performance ]]>
<![CDATA[Widarwati, Estu]]>;
<![CDATA[Sartika, Dewi]]>
<![CDATA[ The Indonesian Capital Market Review Vol. 10, No. 2 ]]>
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<![CDATA[The business performance become an important thing to be main goal of firm activities to get the competitive advantage, but it is contrary with the recession may bring a probability of firm’s decreasing and liquidation. The uncertainty of global economy provides the importance in developing model to monitor, identify and asses potential risks which can threat business sustainability. Cost of Financial Distress (CFD) is one of tools for identifying firm performance decline early risk such as sales growth and stock return, so it can reduce the loss possibility before all lead to bankruptcy. This research aims to explain the evidence of CFD in Indonesia by using opportunity loss and consequency to firm performance. The datas used are 231 firms of Indonesia Stock Exchange (IDX) in 2011 – 2015 and panel regression used for presenting the impact of CFD to firm performance. Consistency of the theory that cost tend to increase following cash flow realization which may be lower in uncertainty of economiy. The analysis finds that Indonesia’s industry have higher CFD and low sales growth after based year of uncertainty economy. The regression result also finds CFD have negative impact to firm’s sales growth. The result propose that CFD can be used as an early detection tool for reducing loss possibility of firm’s market share.]]>
<![CDATA[Effects of Corporate Governance and Capital Structure on Firms’ Performance: Evidence from Major Sectors of Pakistan ]]>
<![CDATA[Ahmed, Farhan]]>;
<![CDATA[Talreja, Suman]]>;
<![CDATA[Kashif, Muhammad]]>
<![CDATA[ The Indonesian Capital Market Review Vol. 10, No. 2 ]]>
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<![CDATA[This study aims to examine the effects of corporate governance and capital structure on firm’s performance. Panel pooled regression method were applied on annual data of two major sectors: automobile & fertilizers from 2006 to 2016. Findings show that board size have positive relationship & audit committee has negative relationship with profitability of automobile sector and vice versa for fertilizers sector. Capital structure is measured by current ratio, debt to equity, short term & long term debt whereas profitability is measured by ROA and ROE. Positive relation of current ratio and profitability of both sectors is observed and the negative relationship of debt to equity of both the sectors has been observed whereas short and long-term debt has no significant relationship in fertil- izers sector. The results should be of great importance to investors, creditors, financial analysts and academicians especially after global financial crisis and collapses of giant organizations worldwide.]]>
<![CDATA[Long Memory in the Indonesia Stock Exchange ]]>
<![CDATA[Panggabean, Martin P. H.]]>
<![CDATA[ The Indonesian Capital Market Review Vol. 10, No. 2 ]]>
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<![CDATA[The aim of this study is to investigate the existence of long-memory process in the Indonesia stock market. This study provides two major contributions and one anomaly. First, this is the first study on long-memory conducted on the Indonesia Stock Exchange at individual stocks. Second, this study uses the method of Detrended Fluctuation Analysis (DFA), supplemented by empirical confidence interval introduced by Weron (2002) and Kristoufek (2010). Our analysis uncover an anomaly that three out of thirteen of the most liquid shares in the Indonesia Stock Exchange exhibit mild long memory process in the daily return data. This result, however, is not robust to length of series utilized. All thirteen stocks exhibit long memory process in the absolute daily return which represent risk.]]>
<![CDATA[Investigating the Impact of Oil Price and Exchange Rate Uncertainty on Stock Return using Whitening Linear Transformation and Vector Autoregressive Model ]]>
<![CDATA[Farahani, Mohammad]]>;
<![CDATA[Hanzaee, Alireza Heidarzadeh]]>
<![CDATA[ The Indonesian Capital Market Review Vol. 10, No. 2 ]]>
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<![CDATA[This study aims at investigating the impact of oil price and exchange rate uncertainty on stock returns in Tehran Securities Exchange (TSE). To this end, "oil price uncertainty" and "exchange rate uncertainty" are considered as independent variables and "return on stocks" as the dependent variable. Daily data on the price of heavy oil, official exchange rate and Tehran Exchange Price Index (TEPIX) are used from 1 January 2002 to 31 December 2012. To evaluate the impact of oil price and exchange rate uncertainty on stock returns, the uncertainty is measured using Whitening Linear Transformation method and is estimated using the Vector Auto Regressive model. Results of the estimations of the model show that there is a significant relation between the uncertainty of oil price and stock returns and another between the uncertainty of exchange rate and stock returns. Thus, the hypothesis of this study are confirmed by the error level of 0.05]]>
