Corresponding Author: Febby
Eka Yuyan
E-mail: [email protected]
INTRODUCTION
Funding is the fuel that runs a
business where companies can choose different methods or a combination of these
methods to obtain capital that is useful in meeting the needs of the company's
short-term goals and long-term goals. There are two types of funding available
to companies when they need to raise capital, namely debt financing and equity
financing. Debt financing wherein the company agrees to pay the loan and
interest on the loan from time to time whereas,
in equity financing, the company sells its share of ownership in exchange for
funds. Problems arise in obtaining capital from debt when the company's
loan amount is high enough or the business is in trouble. This of course will
be difficult for companies to obtain loans or may
require collateral in these
loans. However, it is different from the capital financing method which
is an approach that can be used by companies to obtain additional paid-in
capital by increasing the company's equity by selling its share ownership to
the public to create a strong capital
structure.
The
capital market can be a funding
solution for companies to get fresh funds by conducting an Initial Public
Offering (IPO). The capital market
is a forum that brings together issuers as parties who need funds and investors
as parties who provide funds with buying and selling transactions such as
securities, shares, mutual funds, and other financial instruments. Initial
Public Offering (IPO) or initial public offering is a process where a
company releases its share ownership for the first time to the public. If the
company has made an initial public offering (IPO) then the company has
become public property or commonly referred to as a go-public company. The
initial public offering is a strong positive signal for the company where the
company communicates to the public that the company will soon begin a period of
growth with the successful use of the newly acquired capital. Companies use these external funds to advance the company
to the next level whether in terms of profitability, growth, product offerings,
or services.
When a company conducts its
initial public offering, there are two main anomalies on stock exchanges around
the world, namely underpricing (short-term performance) and poor
long-term performance (poor long-run term performance). The extensive
literature shows that short-term companies experience underpricing where the
stock price at the time of offering is lower than the stock price at the close
of the first day in the secondary market. The underpricing phenomenon
was found in research conducted (Ritter & Welch, 2002) on American companies that conducted IPOs from 1980 to 2001,
namely on the first day of trading closing on average the company's shares
traded 18.8% above the offering price. Furthermore, another study (Siersema, 2017) found that fintech companies in the United States had a
higher level of underpricing than fintech companies in Europe
from 1990 to 2017. This study used a sample of 238 companies consisting of 39 fintech
companies and 39 companies. non-fintech companies in the European
market, while the United States capital market consists of 84 fintech companies
and 74 non-fintech companies. This study shows that the average sample
underpricing is 27.10 %. In the capital market in Indonesia, the underpricing
phenomenon can be found in research (Utomo & Kurniasih, 2020) that companies conducting IPOs in the 2015-2019 period experienced
underpricing which reached an average of 92.70%.
Underpricing is often associated with the initial return that investors
will receive. Initial return in
this study is defined as the difference between the IPO offer price and the
closing market price on the first day of trading on the secondary market (Siew et al., 2015). Initial high returns or positive IPO
shares have been proven in all financial markets around the world (Lowry
et al., 2017; Mohd Rashid et al., 2014). Research (Ritter, 1991) shows that there is a tendency for companies that have high initial
returns to have the worst aftermarket performance. Research (Adrian
et al., 2019) states that initial returns are positive due to market overreaction or companies taking
windows of opportunity and this will lead to poor long-term performance
and when IPO companies show underpricing in a longer period, which is
more than one year is referred to as long-term IPO underpricing (Kumar Singla,
2019). This has become a well-documented phenomenon in much literature
where further observations show that the stock price performance of IPOs is not
only underpricing on the first day but it is found that IPO companies
are found to experience lower stock price performances compared to
non-performing companies. - publisher in the long run.
Furthermore, Ritter's (1991) research
analyzed the long-term performance
of 1526 IPO companies from 1975 to 1984 in the United States by calculating
company returns based on cumulative
average adjusted returns (CARs) and buy-and-hold
abnormal returns in 3 years. years after the IPO. The study found that the
company underperformed by � 29.13% at the end of 36 months after the IPO. Research by Giudici & Roosenboom (2004) found that the long-term stock price performance of three-year
IPOs is inversely related to first-day returns in European new stock markets
and that on average these firms are very poor long-term investments. In the
research of Bessler & Thies (2007), post-IPO returns were measured using raw return CAR and
BHAR with a research sample of 218 IPO companies in the period 1977 to 1995 in
the German capital market in the first 36 months of trading. This study
produces a positive raw return value of about 20% over a 3-year trading
period. However, when compared to the market performance as proxied by the DAX
Index for its market portfolio, the company produces a short-term positive
abnormal performance which then turns into a long-term negative abnormal
performance using the CAR and BHAR adjustment methods. Furthermore, research
conducted on the Japanese capital market (Kirkulak, 2008) which took data from Jasdaq, Osaka Hercules, and TSE Mothers on IPO companies from 1998 to
2001 found that in general, the companies experienced severe poor performance,
which occurred in the second year. after publication. The CAR results were
found to be positive and significant only in the first two months after the
offer and within six months the CAR declined sharply after 31 months there was
a slight increase in CAR, but the company still performed poorly. In a
study (Abu Bakar et al., 2019) in the capital market of Malaysia, it was found that 17 Islamic
companies issued IPOs in 2014 and 2015 showing that the company found an
average abnormal return value of -10.9647% while the market-adjusted
cumulative abnormal value return (MACAR) of -46.0024% with a period
starting from January 2016 to December 2018 and the number of observations for
36 months. The negative MACAR value indicates the performance of this IPO
company is lower than the market on the stock exchange in Kuala Lumpur.
Furthermore, research conducted (AlShiab, 2018) which conducted a comprehensive set of 162 Middle East and
North American (MENA) public offerings for the period 2001 to 2015 stated
that IPO performance varied among the Middle East and North America (MENA
) countries. ) or the Middle East and North Africa Region which are classified
into three groups. The first group, namely Tunis, Morocco, Egypt, and Oman, had
IPO companies that outperformed the benchmark portfolio in the short term but
underperformed in the long term. In this group, Morocco is considered an
extreme case that shows the company's excess positive returns for 12 months
after the IPO date but in the second year after the IPO the company produces
negative returns on cumulative abnormal returns for 5 years. The second
group consisted of representing Jordan, Qatar, and Bahrain where the IPO
performed poorly compared to the benchmark for 60 months or 5 years
after the date of the disability. The final group of countries represents
Kuwait, the UAE, and Saudi Arabia, where the IPO portfolio underwent cyclical
price corrections, from positive to negative, and vice versa, relative to the
value of the fundamental common stock over time after the offering date.
Research (Mindosa & Pasaribu, 2020) found that companies that went public did not perform well in the
3 years after the IPO. The performance of companies that go public will get worse
in the third year, namely in the sample of IPO companies in 2012 and 2019.
Furthermore, research (Kumar & Sahoo, 2021) identifies the aftermarket
stock price performance of listed IPOs during the 2009-2014 period in
India. that the average BHAR across the selected time intervals is negative i.e. 1, 6, 12, 24, and 36 months from the date of recording.
An interesting area of research for both
academics and practitioners. Research on companies that conduct IPOs mostly
focuses on the performance of stock prices on the first day, but very little
research on the performance of IPO companies in the long term. The
performance of IPO shares can be divided into short-term performance, namely the first day, five days, and thirty days, and long-term
performance, namely one year and three years (Teja,
2021). Long-term
performance in this study is measured by buying
and holding abnormal returns, which is a passive investment strategy in
which investors buy shares and hold them for a long time regardless of market
fluctuations. An investor who uses a buy-and-hold
strategy actively chooses investments but does not pay attention to
short-term price movements and technical indicators. Many legendary investors
such as Warren Buffett and Jack Bogle touted the buy-and-hold approach as the ideal strategy for individuals seeking
healthy long-term profits. Barber & Lyon (1997) argue that a simple buy and
hold is good for measuring long-term abnormal stock returns. This study chose a time frame that accurately reflects the long term using a three-year
horizon which many previous researchers have done and is sufficient to capture
the long-term effects thus providing some justification for the three-year timeframe (Agathee et al., 2014;
Huang, 2012; Ritter). , 1991). This is because over three years the long-term performance related to disagreements and
prices will adjust downwards as information flow increases over time and
dissent between investors will decrease ( Agathee
et al., 2014).
One of the factors that can provide information on
the performance of an initial public
offering company is the initiation of dividends. When a company decides on a policy of paying regular cash dividends for the first
time to its shareholders, it is called an initiation dividend. Most of the
researchers revealed that dividend payout policies are interrelated with the
firm's expected future profitability and earnings and (Grullon et al., 2002) argued that increasing dividends would convey information about
changes in the firm's life cycle � in particular, the transition from a growth
phase to a growth phase. faster to a more mature growth phase. The dividend is
the distribution of a portion of the company's income to a group of
shareholders as determined by the company's board of directors. This dividend
can be in the form of cash dividends or stock dividends depending on company
policy. In an IPO company, deciding to pay cash
dividends for the first time is a fundamental thing in the company's life
cycle. This is because the initiation dividend represents a significant
change in the company's financial policy. In addition, dividend policy is an
important factor for shareholders in the stock selection process because
dividends are the company's free cash flow. Although previous studies have
analyzed the relationship between dividend policy and company performance, very
little attention has been paid to the performance of IPO companies, especially
in Indonesia in the context of abnormal returns.
Other factors that may have an impact on a company's long-term
performance and identify as affecting long-term performance include the age of
the company and the reputation of the underwriter. The definition of company
age in this study is the number
of years from the company's establishment until the IPO (Arora
& Singh, 2021). The influence of the firm age variable positively affects
profitability as measured by return on
assets (Samosir, 2018). Age can be the best proxy for
ex-ante uncertainty because the future of younger firms is very difficult to
predict and can also be a good proxy for financial risk (Miller,
2000; Ritter, 1991). The difficulty of estimating
future cash flows for younger companies increases disagreement among investors
which leads to a decline in aftermarket
performance. Ritter
(1991) shows that younger publishing
firms perform lower than their more established counterparts. Supporting this
theory, a positive relationship is also reported in various studies such as (Kumar
& Sahoo, 2021; Merikas et al., 2011) showing that companies with a long
history before they will go public perform
better in the long term and research. In contrast, (Agathe
et al., 2014; Gupta et al., 2021; Komenkul & Siriwattanakul, 2016) reported an insignificant
relationship between firm age and long-term performance. This difference
prompts the current research to re-examine the effect of firm age on long-term
returns after IPOs in Indonesia from 2012 to 2017.
Another factor that can affect the
long-term performance of an IPO company is the reputation of the underwriter, which is a financial
specialist who specializes in and has an important role in the IPO.
Underwriters with good reputations for IPO companies and investors of IPO
shares have more success in the IPO business (Teja,
2021). An initial public offering
is one of the make-or-break moments in
a company's life where its success or failure can have serious long-term
consequences. Go-public companies involve the sale of large
shares and companies are required to publish financial information as well as
other strategic information to be considered as an IPO investment. Public
companies must comply with more regulations than private companies and must
actively market their shares to a large number of new investors, who may not
have heard of the company before. To help with this process, the company hires
an underwriter. The function of the underwriter in the stock market depends
on the relationship with the company. Underwriters
in new stock offerings serve as
intermediaries between companies wishing to issue shares in an initial public
offering (IPO) and investors. Underwriters
help companies prepare for an IPO by considering issues such as the amount
of money to be raised, the types of securities to be issued, and the agreement
between the underwriter and the company. Underwriters in new stock offerings serve as
intermediaries between companies wishing to issue shares in an initial public
offering (IPO) and investors. Research
(Bhattacharya, 2017) confirms a positive relationship between underwriter reputation and long-term IPO performance, and lead underwriter reputation is
considered a signal of company quality that can reduce the level of
underpricing during the IPO (Robiyanto et al., 2020). This is because the underwriter plays
an important role in reducing ex-ante uncertainty. Thus, the information signal theory in this study is a means to
explain the long-term stock performance of initial
public offering companies.
METHOD
This type of research is quantitative research, where the
essence of quantitative analysis is exploiting theory to formulate phenomena in
a study so that it can be understood and elaborated on ideas based on these
findings. To make this happen, theories are often translated into conceptual
models, elaborated mainly through hypotheses, and then measured through
variables (Jonker & Pennink,
2010).
In this
study, the object of research is a company that conducted an initial public
offering on the Indonesia Stock Exchange from 2012 to 2018. The data used in
this study is quantitative in the form of secondary data obtained indirectly,
in the form of stock price data�companies in the study period obtained from the
financial statements. Population refers to the entire group of people, events,
or things of interest that will be investigated by the researcher (Sekaran & Bougie,
2016). The population in this study are all initial public
offering companies listed from 2012 to 2018. The lower limit of the year is
used from the 2012 period because Indonesia's economic growth in 2009 did not
reach 5%, namely 4.63%, caused by the impact of the subprime financial crisis.
Mortgages in the United States and 2010 Indonesia's economic growth rose again
to 6.22% and stabilized at a level above 5% in the following years (Adrian et al., 2019);
with the completeness of the data in this study, the
lower limit of the year of observation is 2012. The sampling technique used in
this study is non-probability sampling, i.e. the researcher can use this
approach when a representative sample is not needed (such as to explore the
existence of a phenomenon or when a probability sample is not available even
with a sample that does not represent a population). Technical
analysis of data in This research is testing data using multiple regression
with the help of SPSS 24.
RESULTS AND DISCUSSION
1.
Descriptive Statistical
Analysis
Descriptive statistics is a unique
method used to calculate, describe and summarize research data collected
logically, meaningfully, and efficiently. According to (Nalendra et al., 2021),
descriptive statistics is a procedure used to describe, organize and conclude
the main characteristics of the sample data obtained for the study. Descriptive
statistics in this study can be seen in table 1:
Table
1. Descriptive statistics
|
Information
|
N
|
Minimum
|
Maximum
|
mean
|
Std. Deviation
|
|
Buy and Hold Abnormal Return
|
179
|
-0.1202
|
0.1643
|
0.000385
|
0.0517440
|
|
Initial Return
|
179
|
-0.95
|
1.50
|
0.3502
|
0.56287
|
|
Initiation dividend
|
179
|
0
|
0.883
|
0.05
|
0.157
|
|
Company Age
|
179
|
1
|
64
|
19
|
13,663
|
|
Underwriter1's Reputation
|
179
|
0
|
1
|
0.73
|
0.447
|
|
Underwriter2's Reputation
|
179
|
0
|
1
|
0.374
|
0.485
|
|
Underwriter3's Reputation
|
179
|
0
|
1
|
0.117
|
0.323
|
|
Underwriter4's Reputation
|
179
|
0
|
1
|
0.056
|
0.230
|
|
Unstandardized Residual
|
179
|
-0.11299
|
0.15201
|
0.0000000
|
0.04986593
|
|
Valid N (listwise)
|
179
|
|
|
|
|
Source: Data
Processing Results
Table 1 shows that the average value of the buy and hold abnormal
return variable is 0.000385, and the standard deviation of the buy and have
unknown return variable is 0.0517440. PT
owns the maximum value for the buy-and-hold unknown return variable. Mark Dynamics Indonesia Tbk
conducted an IPO in 2017, which was 0.1643, while the minimum buys and holds the odd return value of PT. Kisan Komersial Indonesia Tbk, which showed an IPO in 2017,
was -0.1202.
One of the ex-ante factors that
can signal investors in calculating long-term investments in IPO companies is
the initial return. In table 2,
IPO companies in Indonesia in 2012,
2013, 2014, 2016, 2017, and 2018 had a positive initial recovery, and an
average negative initial return was
only found in 2015. The company that experienced the highest initial return of
150% was PT. Indomobil Multi Jasa Tbk PT. In contrast, a minor initial
return occurred in 2015 at -0.06, and the company experienced a negative
initial return of -95% by PT. Mitra Pemuda Tbk, namely:
Table 2. Summary of Initial Return by
Year of Public Offering
|
Year
|
Number
of IPOs
|
Average
Initial Return
|
|
2012
|
19
|
0.30
|
|
2013
|
28
|
0.24
|
|
2014
|
22
|
0.153
|
|
2015
|
16
|
-0.06
|
|
2016
|
13
|
0.12
|
|
2017
|
34
|
0.39
|
|
2018
|
47
|
0.70
|
|
Total Number of IPO Companies
|
179
|
0.70
|
Source: Data Processing Results
The following
variable is the initial dividend as measured by the dividend payout ratio (DPR); the IPO companies
that paid the initiation dividend in the first year were 19%. The companies
that did not pay the initiation dividend in the first year were 81% of the
research sample. The average value in this variable is 0.005, with a
standard deviation of 0.157. The maximum value of the company paying dividends
in the first year is 0.883 or 88.3%, namely PT Indonesia
Vehicle Terminal Tbk. In contrast, the minimum value of the dividend payout ratio is 9.4% owned. by
PT Andalan Perkasa Abadi Tbk.
The third variable studied is the age of the company, where the
minimum value is the difference between the company's establishment and the
year the company conducted an IPO is one year, which is found in the company PT. PP
Properti Tbk and PT. Waskita
Beton Tbk and PT. Waskita Beton Tbk and the maximum value generated is 64 years
owned by PT Malacca Trust Wuwungan Insurance Tbk and PT
Phapros Tbk with an average of 0.73 or 73% and a standard deviation of 0.447 or
44.7%.
The last
variable in this research is the underwriter's
reputation. As mentioned in the operational definition in chapter 3, this
variable is divided into four independent variables: underwriter reputation 1, underwriter
reputation 2, underwriter reputation 3,
and underwriter reputation 4. The underwriter reputation
measurement method uses three levels of dummy variables. The maximum
value for the four levels of underwriter reputation is 1 or 1%, and the drink value is 0% for each level of underwriter reputation. The results of this study indicate that
the average reputation of underwriter 1, reputation of underwriter 2, reputation of
underwriter 3, reputation of
underwriter 4 are respectively 0.73 (73%), 0.374 (37.4%) 0.117 (11.7%),
0.056 (5.6%) and with standard deviation values were 0.447 (44.7%), 0.485
(48.5%), 0.323 (32.3%) and 0.230 (2.3%).
Table 3. Underwriter reputation based on accumulated IPO
frequency
|
Information
|
IPO Frequency
|
|
Underwriter Frequency 1
|
130
|
|
Underwriter Frequency 2
|
67
|
|
Underwriter Frequency 3
|
21
|
|
Underwriter Frequency 4
|
10
|
Source: SPSS 24. data processing results
In table 3,
it can be seen that companies that will conduct an IPO choose to use reputable underwriters, namely 130 companies with underwriter reputation 1, 67 underwriter reputation companies 2, underwriter three frequency as many as
21 companies and underwriting frequency four,
which includes non-prestigious frequencies of 10 companies.
2.
Normality
test analysis
Ordinary or near-average data is a regression model that predicts
bias in data analysis. This test aims to test whether the dependent and
independent variables are usually distributed in the regression model. The
tests used in this study were Kolmogorov Smirnov and histogram tests to see
whether the data were normally distributed or not.
Table 4. Normality Test
|
One-Sample Kolmogorov-Smirnov Test
|
|
|
Unstandardized Residual
|
|
N
|
|
179
|
|
Normal Parameters a, b
|
mean
|
000,000
|
|
|
Std. Deviation on
|
04,986,593
|
|
Most Extreme e
|
Absolute
|
076
|
|
Differences
|
Positive
|
076
|
|
|
negative ve
|
-034
|
|
Kolmogorov-Sm irnov Z
|
|
1.023
|
|
As up. Sig. (2-tailed)
|
|
0.246
|
Source: SPSS 24. data processing results
From the table above, the results of the Kolmogorov-Smirnov test
have a significant value or p-value of 0.246 greater than 0.05. Thus
the data in this study is usually distributed.
In addition to using the Kolmogorov-Smirnov test, it can also be used to
determine the normal distribution by using a probability plot that can be seen
from the distribution of data around the diagonal, normally distributed data
will be distributed around the line, and along the diagonal. This can be seen
from this study's probability plot test, which shows that the data is spread
around the diagonal, indicating that the information is usually distributed.
Figure 1P -Plot
Source: SPSS 24. data processing
results
3. Multicollinearity Test
A multicollinearity test was
carried out to determine whether there is a perfect correlation between
independent variables in the regression model. This study used the Tolerance
Value and Inflation Factor (VIF) method to strengthen the previous test
results. Multicollinearity occurs when tolerance value > 0.1 or VIF
value < 10. Here are the results of the multicollinearity test in this study:
Table
5. Multicollinearity Test
|
Coefficients
|
|
Model
|
Collinearity Statistics
|
|
Tolerance
|
VIF
|
|
1
|
Initial
Return
|
957
|
1.045
|
|
|
Dividend
invasion
|
965
|
1.036
|
|
|
Company
Age
|
966
|
1.035
|
|
|
Underwriter1's
Reputation
|
708
|
1.412
|
|
|
Underwriter2's
Reputation
|
745
|
1.342
|
|
|
Underwriter3's
Reputation
|
916
|
1.092
|
|
|
Underwriter4's
Reputation
|
919
|
1.089
|
|
a.
Dependent Variable: Buy and Hold Abnormal Return
|
Source: SPSS 24. data processing results
Each
independent variable n ilan VIF is less
than ten and or the Tolerance value is more than 0.01; it can be concluded that
there is no multicollinearity problem.
4. Heteroscedasticity Test
Detecting the presence or absence of
heteroscedasticity in data can be done in several ways. One is doing the Glacier test and looking at the scatterplot graph on the
SPSS output.
Table 6. Heteroscedasticity Test
|
Model
|
Sig.
|
|
|
|
(Constant)
|
0
|
|
|
Initial
Return
|
0.998
|
|
|
Initiation
dividend
|
0.188
|
|
|
Company
Age
|
0.805
|
|
|
Underwriter1's
Reputation
|
0.155
|
|
|
Underwriter2's
Reputation
|
0.493
|
|
|
Underwriter3's
Reputation
|
0.077
|
|
|
Underwriter4's
Reputation
|
0.48
|
|
Source: SPSS 24. data processing results
The Glejser
test for each of these variables is 5% (0.05), namely initial return of 0.998,
initiation dividend of 0.188, company age of 0.805 and underwriter
reputation 1, the reputation of
underwriter 2, the importance of underwriter3 and reputation of underwriter 4
are respectively 0.155, 0.493, 0.077, 048 where from all these results all
independent variables are more significant than the significance rate of 5%.
The study also carried out a scatter plot test
which found that if there was no clear pattern, as well as the points spread across
the above
and below zero on the Y axis, there is no heteroscedasticity.
In this study, there were no symptoms of the heteroscedasticity test.
Figure 2. Heteroscedasticity Test
5. Autocorrelation
test
The run test is used to see whether residual data occurs randomly
or not, with a significance level of 0.05. The results obtained by this study
are that the results of asymp. Sig. (2-tailed) is
greater than the rate of 5% (0.05). Above the significance level, then
the regression equation is free from the autocorrelation problem.
Table 7. Autocorrelation Test
|
Runs Test
|
|
|
Unstandardized Residual
|
|
Test Value a
|
-0.00346
|
|
Cases < Test Value
|
89
|
|
Cases >= Test Value
|
90
|
|
Total Cases
|
179
|
|
Number of Runs
|
87
|
|
Z
|
-0.524
|
|
asymp. Sig. (2-tailed)
|
0.6
|
Source: SPSS 24. data processing results
6.
Determination Test (R2)
Tests are conducted to determine
the model's ability to explain the variation of the dependent variable. The
amount of the contribution of a variable can be seen from the test of
determination or R2. Therefore a test is needed for determination (R2). This can be
done to find out good accuracy in the analysis that can be seen from the magnitude of the
coefficient of determination R-Squared.
Table 8. Results of the R2.
Determination Test
|
Model
|
R
|
R Square
|
Adjusted R Square
|
Std. The error in the
Estimate
|
Durbin-Watson
|
|
1
|
.267 a
|
0.071
|
0.033
|
00.0508763
|
1,938
|
Source: SPSS 24. Data processing results
From the research, the R-Squared result is 0.071 or 7.1%. The
independent variables include initial return, initiation dividend, company age,
underwriter reputation, and underwriter reputation. Able to explain the dependent
variable (buy and hold abnormal return)
of 92.9%.
7.
Simultaneous Significance Test (F Test)
The test was used to see the
effect of the independent variable and the dependent variable as a whole. The test is observed from
the F value resulting in a level of 0.10. The significance is that when F <
0.1, H0 is rejected, which
means that the equation model is accepted or feasible. On the other hand, when the significance of F > 0.1,
there is no simultaneous effect.
Table 9. Simultaneous test results (Test F)
|
Model
|
|
Sum of Squares
|
df
|
Mean Square
|
F
|
Sig.
|
|
|
Regression
|
0.034
|
7
|
0.005
|
1.875
|
.076 b
|
|
|
Residual
|
0.443
|
171
|
0.003
|
|
|
|
|
Total
|
0.477
|
178
|
|
|
|
Source: SPSS 24. Data processing results
In the table above, the calculated F value is 1.875 with a probability
value of 0.076 < 0.1, which means that initial
return, initiation dividend, company age, underwriter reputation 1, underwriter
reputation 2, underwriter reputation 3,
underwriter reputation 4 have a
simultaneous effect on buy and hold
abnormal returns.
8.
Partial Significance Test (T-Test)
This test is used to explain whether or not there is an effect of
initial return, initiation dividend, company age, underwriter reputation1,
underwriter reputation2, underwriter reputation3, and underwriter reputation4
on the dependent variable buy and hold abnormal returns.
Table 10. Multiple Regression Results
|
Information
|
Unstandardized Coefficients
|
t
|
Sig.
|
|
|
B
|
|
|
|
(Constant)
|
-0.01
|
-0.797
|
0.427
|
|
Initial Return
|
-0.015
|
-2,157
|
0.032
|
|
Initiation dividend
|
-0.023
|
-0.938
|
0.349
|
|
Company Age
|
0.001
|
1980
|
0.049
|
|
Underwriter1's Reputation
|
0.004
|
0.423
|
0.673
|
|
Underwriter2's Reputation
|
0.011
|
1.221
|
0.224
|
|
Underwriter3's Reputation
|
-0.012
|
-0.933
|
0.352
|
|
Underwriter4's Reputation
|
0.006
|
0.319
|
0.75
|
|
a Dependent Variable: Buy and Hold Abnormal
Return
|
|
Source: SPSS 24. data processing results
Table 10 above shows that the initial
return variable has a significant level of 0.032 < 0.10, so H0 is
rejected, and H1 is accepted. The conclusion is that initial returns significantly
affect buying and holding abnormal returns on IPO companies in Indonesia.
The initiating dividend variable with dividend payments in the first year after
the initial public offering has a
significant level of 0.349 > 0.10, so H2 is rejected, and H0 is accepted. It
can be concluded that the initiation dividend has no significant effect on buying and holding abnormal returns in Indonesian
IPO companies. The results of the third hypothesis testing show the
significance level of the firm age variable is 0.049 <
0.10, so the firm's age significantly affects buy and hold abnormal returns so that H0 is rejected and H3 is
accepted. The conclusion for the company's variable period is that the
company's age has a significant effect on buying
and holding abnormal returns on IPO companies in Indonesia. Following the
hypothesis testing in chapter 2, the significance level of the underwriter reputation variable 1, underwriter reputation 2, underwriter reputation 3, and underwriter reputation 4 are 0.673,
0.224.0352, and 0.75 > 0.10, respectively. So it
can be concluded that underwriter reputation at various levels significantly
affects buy and hold abnormal returns on
IPO companies in Indonesia. It can be said that H0 is accepted, and H4, H5, H6,
and H7, are rejected.
The following are results of the discussion of the research results are
as follows:
1.
The Effect of Initial Return on the Long-Term Performance of
the Company's Initial Public Offering
In this study, the results showed that IPO companies that
experienced positive initial returns of 78% comprised 139 companies,
which was an advantage for investors, while underpricing
for companies participating in negative initial
returns of 22%, including 40%. Initially, the IPO company had a positive
return on the first day in the secondary market. However, in the long term,
namely 36 months or three years, the
market underperformed (poor performance). This can be shown by regression
testing, which indicates a significant negative intercept or
constant of -0.01 or -1%. The regression test results in table 4.11 show that
it has a coefficient (B) of -0.015 and a
significant value of 0.032, which means that initial return has a negative and significant effect on long-term
performance as proxied by buying and
holding abnormal returns. The study results
follow the signaling theory where when conducting an initial public offering; the company significantly underpins to make the initial public offering more attractive;
joint strategy companies use to signal to the market (Adrian
et al., 2019; Singla, 2019). Market information asymmetry theory also
supports the results of this study in that the stock value takes time to be
corrected to approach fair value, which
in this study takes 36 months. This study's results align with the research by Agathee
et al. (2014), who identified. The highest underperformance
occurred in the highest initial
return group, which showed worse long-term performance than IPO companies
with lower initial returns in the
Mauritius capital market from 1989 to 2010. Furthermore, research with the case study of the
Indonesia Stock Exchange (Adrian
et al., 2019) found the result that the more, more significant the initial return rate during the IPO of
stock, the worse the long-term performance of the company, while according to (Hanafi
& Hanafi, 2022) more specifically found that there
was a negative
relationship between initial return and
long-term performance for Islamic and non-Sharia IPOs in Indonesia. , this study uses IPOs during 1990�2018
from Indonesia.
2.
The Effect of
the First-Year Initiated Dividend on the Long-Term Performance of the Company's
Initial Public Offering
According to (Raed, 2020),
dividend, yield, and dividend payout ratio variables can detect a solid
relationship to company performance. The regression test results show that the
initiation dividend has a coefficient (B) of -0.023 and a significant value of
0.349, indicating
that the initiation dividend variable has a negative effect and does not
significantly impact the long-term stock performance
of IPO companies. (Raed,
2020)However, in research, the initiation dividend does not
affect the long-term stock performance of IPO companies in Indonesia. This is
because companies that pay dividends in the first year after the IPO are only
19% or 34. In comparison, companies do not pay initiation dividends in the
first year after the IPO, 81% or 145 companies. The results of this study are
supported by the company's poor performance three years after the IPO, which
can be seen with a negative intercept. The results of this study are in line with
(Sugeng, 2016), which states that companies listed
on the Indonesia Stock Exchange (IDX) that initiate dividends imply that the dividend initiation
behavior of Indonesian companies is proven not to fully follow the framework of
the dividend signaling theory where the theory is developed based on the
behavior of regular dividends.
The conclusion from the results of this study is that generally,
companies conducting IPOs aim to promise growth to the public as illustrated in
the offering prospectus, where external funds from the public will be used for
future acquisitions, research, and development of innovative products and
technologies so that companies conducting initial public offerings unlikely to
be in a position to pay dividends in the future. In general, companies that operate
initial public offerings have negative cash flows, so they require substantial
external funds aimed at maintaining the company's growth rate. In addition,
many companies prefer earning retention (earnings retention) when the
company makes a profit and thus can reduce the company's dependence on the
unpredictable capital market when the company requires the availability of
funds in the company's growth projects (Jain et al., 2009). This condition conditions investors to expect returns in the
form of capital gains rather than dividends.
3.
The Effect of
Company Age on Long-Term Stock Performance of a Company's Initial Public Offering
Young. In the tests carried out,
it is shown that the company age variable has a coefficient value (B) is 0.001 with a significance
value of 0.049; in this case, the company's age has a positive and significant
effect on the buy and hold abnormal
returns. The results of this study are in
line with Strottner (2017), who identified
older publicly traded companies already have a strong
position in the market even though they have not been publicly funded. Research
by Mallinguh
et al. (2020) stated that company age significantly
influences foreign investors' decisions regarding domestic companies. The
results of this study conclude that mature companies have passed the test of
time in a business environment, understand industry trends better, and,
therefore, have a higher probability of identifying the right project for the
allocation of money raised compared to their more advanced counterparts. The
results of this study are supported by research data which shows that companies
that are small or equal to 10 years old with an average of BHAR -0.899, and companies that are more than ten years old
have an average of 0.008.
4.
Effect of Underwriter's Reputation on Long-Term
Stock Performance of Initial Public Offering Companies
The results of testing the influence of underwriter reputation 1, underwriter
reputation 2, underwriter reputation 3,
and underwriter reputation 4 had no
significant effect on the long-term stock performance of IPO companies; this is
indicated by a small significance value of 10% at each level of underwriter reputation which is worth 0.673, 0.224, 0.352, 0.75 and the coefficients 0.004,
0.011, -0.012, 0.006. The results of this study find that IPO companies that
use underwriter reputation with the
highest frequency or underwriter
reputation one do not result in positive long-term
performance as well as underwriter
reputation 2, and underwriter
reputation 3. influence on
long-term stock price performance. The results showed
that the underwriter's reputation had an insignificant relationship with the
IPO valuation. Companies that use the services of leading underwriters have an
IPO offering price set lower than the intrinsic value after three years or 36 months.
This is in line with research (Goergen
et al., 2007) which did not find the impact of underwriter reputation on long-term
performance companies in the UK, and research (Amelia
& Adrianto, 2020) identified underwriter reputation not having
a significant effect on performance. Companies that carry out IPOs, because
using a reputable underwriter neither
guarantees reducing uncertainty for investors as well as the truth of the
information provided by the company through the prospectus. Similarly, (Thomadakis et al., 2012) underwriter reputation emerges as a negative determinant wherein
the findings suggest the possibility that leading underwriters drive high
aftermarket prices in the short term (i.e., in the first month of trading) and
generate subsequent negative returns, which is more evident in the Greek IPO
company.
CONCLUSION
This study has two objectives analyzing
the long-term performance of Indonesian IPOs made during the period 2012 to
2018 and identifying the effect of initial return, dividend initiation, company
age, and underwriter reputation as a signaling mechanism in long-term
post-listing performance. This study uses a sample of 179 Indonesian IPO
companies listed on the Indonesia Stock Exchange. In general, the long-term
performance of IPOs in Indonesia from 2012 to 2018 during the three years after
the IPO found negative abnormal results. To test the support for the hypothesis
under study, the current study uses multiple regression with the help of SPSS
version 24.
Testing the first hypothesis found that
initial return significantly negatively affects long-term stock performance.
The results of this study follow the signaling theory, where the company
deliberately makes the price more attractive to investors, which in the end,
after 36 months, will approach its fair value. In IPO companies on the
Indonesia Stock Exchange for 2012-2018. This is because companies that make
dividend initiation payments are only 19%, with an average negative abnormal
return. Testing the third hypothesis found that age significantly affected the
firm's long-term stock performance. R&D activities, thereby increasing
their competitiveness and enterprise value. In testing the fourth hypothesis,
it is found that the underwriter's reputation does not have a positive and
significant effect on the long-term stock performance of IPO companies. The
underwriter's reputation method explains the long-term performance of Initial
Public Offering (IPO) shares differently (Amin, 2007). In
this study, underwriter reputation based on the accumulation of IPO frequency
has not been able to explain its relationship with long-term performance.
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