MARKET REACTIONS TOWARDS BOARD OF COMMISSIONER TURNOVER ANNOUNCEMENT IN INDONESIA

• Main Author: Handoko Putra, Abigael
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/20681
• Institution: Institut Teknologi Bandung

This study aims to identify whether market responds to board of commissioner turnover announcements using event study methodology on a filtered sample of 107 turnover dates from 2010 to 2015 on Indonesian LQ45 indexed firms. Using an estimation window of 190 days (day-200 to day-10) and an event window of 21 days centered on the announcement date, only turnover announcements that have no confounding corporate action events around both windows are included in the research sample. The result shows highest positive cumulative price reaction on three-day-window centered on the announcement date with the day+1 of the announcement date showing highest positive individual price reaction. This study also attempts to find the determinants of price reaction independently by testing age, gender, nationality, and education of the new board of commissioner members using multiple regression models. The result shows positive market reaction towards the appointment of board of commissioner members with average age of 45 years old and lower. While members within this age group are less appointed, market optimism also grows larger when the proportion of board of commissioner members of this age group increases. In addition, in line with the declining trend of foreign member appointment in the sample, market reacts significantly negative towards the appointment of foreigners within board of commissioner. The negative reaction even grows larger when the proportion of foreigners within the board increases. Despite the high number of appointment of Master degree holders, this study finds no significant market reaction towards appointment of members with Master and/or Doctoral degrees. This is also the case for female (gender) variable So, the practical implication of this finding suggests that investors can anticipate Indonesian board of commissioner turnover with new members being 45 years old or lower on average or having higher proportion of this age group and having lower or zero proportion of foreigners. Indonesian firms may also consider these age and nationality factors in appointing board of commissioner members.