EFFECT OF STOCK BUYBACK TOWARDS FINANCIAL PERFORMANCE AND MARKET REACTION : STUDY OF LISTED COMPANIES IN INDONESIA STOCK EXCHANGE

• Main Author: Garda Ariyan, Etano
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/72333
• Institution: Institut Teknologi Bandung

This research aims to obtain empirical evidence about the differentiation in financial performances of the companies listed in Indonesia Stock Exchange before and after conducting stock buyback. In addition, the research is also aimed to understand the effect of stock buyback announcement to the market reaction. There are just few studies of stock buyback in Indonesia especially the study which examine the impact of it towards profitability ratio. The result of this study provides more comprehension for investors or board of executives what has to be consider before and after conducting buyback program. The research use market model to find the expected return with 61 days of event window period, consisting of 30 days before and after stock buyback announcement. The research samples were 17 different listed companies which perform 21 stock buyback actions from 2001-2013 in Indonesia Stock Exchange. We use paired sample t-test and wilcoxon signed-rank test to analyze the efect towards financial performance through four profitability ratios approach while difference in difference method is used to observe the effect towards stock return caused by buyback announcement. The result state that there is no significant difference in financial performance after the event of buyback, while on the contratry the there was significant impact on the stock return.