MARKET REACTION TO CONSUMER BOYCOTT OF ISRAELAFFILIATED BRANDS IN INDONESIA

• Main Author: Tricahya Utami, Puteri
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/84191
• Institution: Institut Teknologi Bandung

In 2023, a consumer boycott against Israel-affiliated brands and products occurred worldwide, including in Indonesia, aiming to pressure companies and governments to withdraw support from Israel. A prominent religious organization in Indonesia released a fatwa—Islamic legal opinion— about the prohibition of direct and indirect support towards Israeli aggression against Palestine. The traction that this consumer boycott got from social media quickly affected the targeted brands. However, in Indonesia, these targeted brands are managed by third-party companies, where discrepancies between companies exclusively managing the targeted brands and those managing multiple brands exist, raising a potential threat for not only the targeted brands, but also the parent company and its shareholders. This research aims to analyze the market reaction to this consumer boycott in Indonesia, as reflected in the abnormal returns and trading volume activity of 12 companies owning perceived Israel-affiliated brands. Utilizing secondary data, this research employs the event study methodology using four different event windows, 3 and 7 days to assess the immediate reaction (short term) and 11 and 21 days to assess the long-term reaction. A subsampling was carried out based on the proportion of brands being boycotted—brand boycott ratio—in a firm. The results of this study conclude an immediate market reaction to the consumer boycott in the short term, as shown by abnormal returns, while significant changes in trading volume activity only occurred in the longer term. Companies with a low brand boycott ratio remained unaffected by the event, while those with a high ratio were negatively affected, similar to the overall population. This suggests that only companies with a high brand boycott ratio are significantly impacted by the consumer boycott, implying that companies with diverse brand portfolios withstand less impact when a consumer boycott occurs.