| Summary: | The economic crisis in Indonesia in 2008 sourced from deleveraging
activities by foreign investors. This led to macroeconomic shocks in Indonesia in
the falling value of the rupiah against the dollar (depreciation). On October 28,
2008 there is an event where a day rupiah depreciated 13 percent against the
dollar. This is the largest daily depreciation during 2006-2010. The purpose of this
study was to prove the existence of negative abnormal return from the effects of
events drastically depreciation of the rupiah against the dollar in Indonesia
Banking Industry. This study also aimed to find evidence on the stock market
reaction to foreign-owned banks is greater than the stock market reaction to the
locally owned banks from the effects of depreciation of the rupiah events
drastically.
This study used 30 samples, then taken to be the beginning of the study
sample with purposive sampling method. After going through three criteria,14
study sample consisted of 10 banks locally owned were selected, and 4 foreignowned
banks. Analytical techniques used in this study is the event study.
The results of this study indicate that the drastic depreciation of the rupiah
events can cause a negative abnormal return on the shares of locally owned banks
and foreign-owned bank shares. However, this study found no evidence that the
market reaction inflicted on foreign-owned banks is greater than the market
reaction to the locally owned banks due to depreciation of the rupiah events
drastically.
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