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The Effect of Rights Issue on Company Financial and Stock Performances

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2018CS150CS/150 (THESIS S1)Available

Publisher :IPMI International Business School , 2018

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.

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Publisher Place Jakarta
ix, 111p; 30cm
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