The effect of rights issue on company financial and stock performances

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Alvina, Samantha (2018) The effect of rights issue on company financial and stock performances. Undergraduate thesis, Sekolah Tinggi Manajemen IPMI.

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Abstract

Corporations in the capital market engage in rights issue as an alternative of generating additional capital to finance future growth and expansion or to finance internal operations. Rights issue offers the existing shareholders of the company the opportunity of acquiring new stocks, which are generally offered at a price lower than the current market price in order to encourage participation of the shareholders. This research aims to examine the effect of rights issue on the performance of the companies listed at Indonesia Stock Exchange (IDX). The study mainly used secondary data gathered from the official IDX site and from financial reports published by the companies. Research was done using event study method, and data was analyzed through descriptive statistics analysis and hypothesis testing. The parametric analysis tools used for hypothesis testing are one sample t-test, paired sample t-test and simple linear regression with dummy variables, with an event window of five days before, the day of and five days after rights issue. The research population included all corporations listed at IDX, which consisted of 169 companies that conducted rights issue in the period 2006-2015. Purposive sampling method resulted in 31 companies that were chosen for further observation. Findings revealed that rights issue has no effect on stock price performance before, during and after rights issue, with an exception of positive abnormal returns at the time of rights issue; the study also found that rights issue does not affect profitability and no significant difference in companies’ Return on Assets and Return on Equity. The study recommends that issuing firms should focus on conveying positive information to the market through the announcement of the rights issue, and that investors should regularly monitor the companies’ performance to make rational and informed investment decision concerning the rights issue of the listed companies. Keywords: Rights Issue, Stock Price Performance, Profitability, Abnormal Return, Return on Assets, Return on Equity

Item Type: Thesis (Undergraduate)
Subjects: H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
Divisions: Thesis > Bachelor of Business Administration
Depositing User: Putri Dwi Novia
Date Deposited: 16 Jan 2020 07:03
Last Modified: 22 Nov 2021 07:09
URI: http://repository.ipmi.ac.id/id/eprint/198

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