EVENT STUDY OF IPO IN INDONESIA: PUMP-AND-DUMP & FLIPPING STRATEGY ANALYSIS

Abstract

There were three important IPO anomalies: the positive average initial return (improperly called short-term 'underpricing'), the long-term underperformance, and hot/cold IPO. The EVENT STUDY model explained the 'underpricing' based on the assumption that the underwriter sets the initial price equal to the market-perceived true value and investors were rational. IPO prices are affected by demand and supply. The idea of the model was to explore pump-and-dump and flipping patterns exhibited upon IPO anomalies event in Indonesia. Pump-and-dump is the strategy to manipulate stock prices, while flipping was stocks bought at the IPO and sold at early days ta listing date. This strategy oftentimes exhibits anomalous behavior. Some implications of this model for the IPO market were positive 1st-day initial return (IR) and a negative relation cumulative average abnormal 5-days abnormal return (CAAR-5days) for flipping strategy. The other was a relationship between underperformance cumulative average 30-days abnormal returns (CAAR-30days) and cumulative average 5-days (CAAR-5days) abnormal returns in terms of pump-and-dump strategy. Using the relation between the Characteristics (Size of issue, Board and Floating rate) and Macroeconomics Condition (Central Bank Rate, Inflation rate, USD/IDR exchange, and GDP growth), and the IR, a CAAR-5days and a CAAR-30days, this EVENT STUDY explained the existence of the pump-and-dump and flipping pattern in the Indonesian stock exchanges. The Authors implemented a multivariate analysis of variance (MANOVA) to test hypotheses regarding the effect of a three-variables dependent (the initial return, a 5-days abnormal return, and a 30-days abnormal return) into several dependent variables. Using the IPO data taken from 2015-2019, the paper found that this EVENT STUDY explained the existence of pump-and-dump and flipping patterns at the early trading of IPO stocks in the Indonesia Exchange Market.

Determination of Liquidity Ratio: Analysis Before IPO and After IPO

“…To increase the Liquidity Ratio by taking into account the Conditions before the IPO, what must be done by management is the addition of current assets through sales growth or efficiency of operational costs or additional capital from the owner, where the proportion of total current assets can increase compared to total assets. Conditions before the IPO affect the Liquidity Ratio, if the Conditions before the IPO are seen as a positive phenomenon, then this variable can encourage an increase in the Liquidity Ratio Conditions before the IPO had an effect on the Liquidity Ratio, this is in accordance with the results of research: (Munawar & Mahaputra, 2022) and (Sudarmaji, Ambarwati, Keiko Hubbansyah, & Budi Astuti, 2020).…”

Determinants of Reputation, Experience and Communication on Employer Branding

“…Effect of Reputation on Employer Branding, this is in line with research conducted by: (Sudarmaji, Ambarwati, Keiko Hubbansyah, & Budi Astuti, 2020), (Parera & Tumanggor, 2021).…”

Modeling and Estimation of Cumulative Abnormal Return using VECM

“…Hence we claimed that under-pricing performed on the Indonesia stock exchange provided that the lowest minimum value existed in the IR variable. At the same time, the highest limit found in the CA30D due to the Buy & Hold practices, Sudarmaji, Ambarwati, Hubbansyah, and Shinta (2020).…”

“…Based on empirical studies by Sudarmaji et al (2020) this article revealed that underpricing strategy led to Pump-and-Dump & Flipping strategy occurred on the Indonesia Stock Exchange. The underpricing strategy could be written in the following ways:…”