Price reaction to rights issue announcements of family firms
This study examines the effect of family control on the price reaction to rights issue announcements of publicly listed firms in Indonesia during the period of 2005–2018. The study uses agency theory, which discusses the conflict of interest between controlling/majority and non-controlling/minority...
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| Format: | Article |
| Language: | English |
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LLC "CPC "Business Perspectives"
2022-06-01
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| Series: | Investment Management & Financial Innovations |
| Subjects: | |
| Online Access: | https://www.businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/16602/IMFI_2022_02_Setia-Atmaja.pdf |
| _version_ | 1811284057844088832 |
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| author | Lukas Setia-Atmaja Henry Suthiono |
| author_facet | Lukas Setia-Atmaja Henry Suthiono |
| author_sort | Lukas Setia-Atmaja |
| collection | DOAJ |
| description | This study examines the effect of family control on the price reaction to rights issue announcements of publicly listed firms in Indonesia during the period of 2005–2018. The study uses agency theory, which discusses the conflict of interest between controlling/majority and non-controlling/minority shareholders. The results show that the price reaction to the right issue announcements for publicly listed firms in Indonesia is statistically significantly negative. The mean of cumulative abnormal returns (CAR) falls between –1.40% (for the Day 0 window period) and –3,43% (for the –5 to +5 window period). Further examination indicates that family control is associated with a more negative price reaction to these rights issue announcements. Specifically, for rights issue announcements of family firms, the mean cumulative abnormal returns (CAR) fall between –1,98% at announcement day (Day 0) and –5,23% for the event window period (–5 to +5). Meanwhile, for rights issue announcements of non-family firms, the current study found statistically insignificant price reactions to rights issue announcements for all the event window periods. These findings suggest that investors perceive higher agency problems among family firms where the family controlling shareholders tend to misuse and tunnel the rights issue funds for their own private benefit. |
| first_indexed | 2024-04-13T02:21:46Z |
| format | Article |
| id | doaj.art-3fe9e8ee86fc4195a7266cd94ec5f13c |
| institution | Directory Open Access Journal |
| issn | 1810-4967 1812-9358 |
| language | English |
| last_indexed | 2024-04-13T02:21:46Z |
| publishDate | 2022-06-01 |
| publisher | LLC "CPC "Business Perspectives" |
| record_format | Article |
| series | Investment Management & Financial Innovations |
| spelling | doaj.art-3fe9e8ee86fc4195a7266cd94ec5f13c2022-12-22T03:06:55ZengLLC "CPC "Business Perspectives"Investment Management & Financial Innovations1810-49671812-93582022-06-0119222122910.21511/imfi.19(2).2022.1916602Price reaction to rights issue announcements of family firmsLukas Setia-Atmaja0https://orcid.org/0000-0001-5380-0544Henry Suthiono1https://orcid.org/0000-0003-0065-8067Ph.D., Associate Professor, School of Business and Economics, Universitas Prasetiya MulyaMaster/Lecturer, School of Business and Economics, Universitas Prasetiya MulyaThis study examines the effect of family control on the price reaction to rights issue announcements of publicly listed firms in Indonesia during the period of 2005–2018. The study uses agency theory, which discusses the conflict of interest between controlling/majority and non-controlling/minority shareholders. The results show that the price reaction to the right issue announcements for publicly listed firms in Indonesia is statistically significantly negative. The mean of cumulative abnormal returns (CAR) falls between –1.40% (for the Day 0 window period) and –3,43% (for the –5 to +5 window period). Further examination indicates that family control is associated with a more negative price reaction to these rights issue announcements. Specifically, for rights issue announcements of family firms, the mean cumulative abnormal returns (CAR) fall between –1,98% at announcement day (Day 0) and –5,23% for the event window period (–5 to +5). Meanwhile, for rights issue announcements of non-family firms, the current study found statistically insignificant price reactions to rights issue announcements for all the event window periods. These findings suggest that investors perceive higher agency problems among family firms where the family controlling shareholders tend to misuse and tunnel the rights issue funds for their own private benefit.https://www.businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/16602/IMFI_2022_02_Setia-Atmaja.pdfagency theoryfamily firmsprice reactionrights issue announcementstunneling |
| spellingShingle | Lukas Setia-Atmaja Henry Suthiono Price reaction to rights issue announcements of family firms Investment Management & Financial Innovations agency theory family firms price reaction rights issue announcements tunneling |
| title | Price reaction to rights issue announcements of family firms |
| title_full | Price reaction to rights issue announcements of family firms |
| title_fullStr | Price reaction to rights issue announcements of family firms |
| title_full_unstemmed | Price reaction to rights issue announcements of family firms |
| title_short | Price reaction to rights issue announcements of family firms |
| title_sort | price reaction to rights issue announcements of family firms |
| topic | agency theory family firms price reaction rights issue announcements tunneling |
| url | https://www.businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/16602/IMFI_2022_02_Setia-Atmaja.pdf |
| work_keys_str_mv | AT lukassetiaatmaja pricereactiontorightsissueannouncementsoffamilyfirms AT henrysuthiono pricereactiontorightsissueannouncementsoffamilyfirms |