THE FACTORS AFFECTING SHARE REPURCHASE DURING THE COVID-19 PANDEMIC

• Main Author: Frani Akmyga, Stalsa
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/62847
• Institution: Institut Teknologi Bandung

In 2020 there was a pandemic that had affected the world's capital markets, including the Indonesian capital market. This can be seen from the declining of Composite Stock Price Index (IHSG) in March 2020 which fell to 38% compared to the beginning of 2020. To anticipate a further declining in the IHSG, OJK issued Circular Letter (CL) No. 3/SEOJK.04/2020 concerning Other Conditions as Market Conditions that Fluctuate Significantly in the Implementation of Shares Buyback Issued by Issuers or Public Companies. This CL allows Listed Company to exercise share repurchases without the approval of the General Meeting of Shareholders (GMS). The exercise period is 3 (three) months from the announcement of the plan. Furthermore, the Indonesian government issued Government Regulation (PP) No. 29 of 2020 concerning Income Tax Facilities in the Context of Handling Corona Virus Disease (Covid-19) where the government provides tax incentives for companies that carry out share repurchases based on the OJK’s CL until September 2020. There are at least 106 (one hundred and six) companies announced plans to repurchase their shares in accordance with this CL. As many as 73% of the companies have exercised share repurchases, but the exercise value only reached 18% of the total target of the company. This study aims to examine the factors that influence the low realization of the share repurchase target. This study examines the effect of dividend payment variables, eligibility to get tax incentives, stock returns, cash ownership, public float, and company’s size on the level of realization of the target for the implementation of share repurchase in financial and non-financial companies. The results of the study indicate dividends and eligibility to tax incentives have a significant positive effect on the level of realization of the target for the implementation of share repurchases. While assets have a significantly negative influence. However, the stock return, cash holdings, and public float does not have a significant relationship to the level of share repurchase execution. In addition, this study also proves that stock repurchase is not a substitute for dividend payments, where dividend payments have a significant positive effect on the level of realization of the stock repurchase target. This research will contribute as an empirical analysis of the factors that affect the level of realization of the target for the implementation of share buybacks which were previously rarely done. This study only examines announcements in the period March 2020 to June 2021. In the future, research can be carried out by expanding the scope until the CL is revoked. This study also prepares an implementation plan if the company wants to repurchase its shares based on the CL.