Public perception and firm’s market performance: The case of Annual Report Award in the emerging economy

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Abstract

It has been a general belief that the public’s perception can affect the firm’s value. Subsequently, many initiatives have been made by various governments to pull such effects on their listed firm. Particularly in Indonesia, one of those initiatives is known as Annual Report Award (ARA), whereby its participants are required to show their good corporate governance (GCG) practices. Thus, the purpose of this study is to investigate the 2018 ARA’s effect on the market performance of its listed firms’ categories. In which, the analysis focuses on the categories’ abnormal returns and the abnormal trading volume. Through the application of the event study methodology, the findings imply that the Indonesian capital market is more attentive to the participants within the financial state-owned enterprise category, and 2018 ARA has helped increase the participants’ abnormal return within the respective category. Although an increase in abnormal returns is not necessarily accompanied by an increase in abnormal trading volume, the findings also suggest that the 2018 ARA can influence participants’ stock returns across multiple market indices. Hence, the ARA event could influence the public’s perception and, simultaneously, bringing added value to its participants.

Keywords: Annual Report Award, Event Study, Abnormal Stock Return, Abnormal Trading Volume, Indonesia

Authors’ individual contribution: Conceptualization — A.A.; Methodology — A.A. and K.B.S.; Investigation — K.B.S.; Resources — K.B.S.; Data Curation — K.B.S.; Writing — Original Draft — A.A. and K.B.S.; Writing — Review & Editing — A.A. and K.B.S.; Visualization — K.B.S.; Supervision — A.A.; Project Administration — A.A.; Funding — A.A.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

Acknowledgements: The Authors acknowledge and would like to thank Mr. Mas Achmad Daniri (Chairman of the National Committee on Governance Indonesia, 2004–2019).

JEL Classification: G12, G14

Received: 27.08.2021
Accepted: 13.01.2022
Published online: 17.01.2022

How to cite this paper: Alijoyo, A., & Sirait, K. B. (2022). Public perception and firm’s market performance: The case of Annual Report Award in the emerging economy. Journal of Governance & Regulation, 11(1), 73–85. https://doi.org/10.22495/jgrv11i1art8