ABSTRACT
THE IMPACT OF LOAN TO VALUE POLICY IMPLEMENTATION TOWARDS CAPITAL MARKET REACTION ON PROPERTY COMPANIES ENLISTED IN IDX
(Event Study)
By
SISKA MEILANDA SARI
This study aims to analyze the impact of the announcement Loan to Value (LTV) policy implementation by Bank of Indonesia towards capital market reactions particularly on property companies which enlisted in Indonesia Stock Exchange (IDX). This research uses event study method to analyze if public information related to Loan to Value policy has information content and relevant to the investors which was measured by abnormal return and trading volume activity. The population in this research are the companies which enlisted in Indonesia Stock Exchange and the sampling methodology utilized in this research is purposive sampling method. Analysis tools in this research are descriptive statistics, normality test and paired sample t-test.
BIOGRAPHY
The writer have the fullname Siska Meilanda Sari and was born in Bekasi in May 11th 1994. The writer is the second daughter from her father Purnomo and her mother Alam Pasti.
Her first education is on Sekolah Dasar Negeri 1 Rajabasa and she graduated on 2006, Sekolah Menengah Pertama Negeri 8 Bandar Lampung which she attended in 2006 and graduated in 2009, then Sekolah Menengah Atas Negeri 10 Bandar Lampung which she finished in 2012.
i CONTENT LIST
Pages
CONTENT LIST... i
LIST OF TABLES ... iv
LIST OF FIGURES ... vi
I. INTRODUCTION... 1
1.1 Background ... 1
1.2 Problem Formulations... 7
1.3 Research Objectives ... 8
1.4 Research Benefits... 8
1.5 Research Framework... 9
1.6 Hypothesis... 10
II. LITERATURE REVIEW... 12
2.1 Capital Market ... 12
2.2 Capital Market Efficiency... 12
2.3 Stock Return ... 15
2.4 Abnormal Return ... 19
2.4.1 Types of Abnormal Return ... 19
2.5 Trading Volume Activity ... 21
ii 2.7 Capital Market Reaction to The Announcement of Loan to Value Policy
Implementation ... 23
2.8 Event Study ... 25
2.9 Previous Research ... 26
III. RESEARCH METHODOLOGY ... 29
3.1 Type of Research ... 29
3.2 Type of Data ... 29
3.3 Data Collection Methods ... 30
3.4 Population and Sample ... 30
3.5 Operational Definition of Variable ... 31
3.6 Data Analysis Method... 32
3.7 Hypothesis Testing... 35
IV. RESULT AND DISCUSSION ... 37
4.1 Overview of Object Research ... 37
4.2 Result ... 38
4.2.1 Result of Actual Return Analysis ... 38
4.2.2 Result of Expected Return Analysis... 39
4.2.3 Result of Abnormal Return Analysis... 40
4.2.4 Result of Average Abnormal Return Analysis ... 41
4.2.5 Calculated Result of Trading Volume Activity Analysis ... 43
4.2.6 Calculated Result of Average Trading Volume Activity ... 43
4.3 Descriptive Statistics Testing... 45
4.4 Normality Testing ... 46
iii
4.5.1 Hypothesis 1 Testing ... 48
4.5.2 Hypothesis 2 Testing ... 50
4.6 Discussion ... 51
4.6.1 Discussion of Hypothesis 1 Testing Result ... 51
4.6.2 Discussion of Hypothesis 1 Testing Result ... 52
V. CONCLUSION AND SUGGESTION... 54
5.1 Conclusion ... 54
5.2 Suggestion... 55 REFERENCES
THE IMPACT OF LOAN TO VALUE POLICY IMPLEMENTATION TOWARDS CAPITAL MARKET REACTION ON PROPERTY COMPANIES
ENLISTED IN IDX (Event Study)
By:
SISKA MEILANDA SARI
Undergraduate Thesis As One of Requirement to Achieve BACHELOR OF ECONOMICS DEGREE
From
Management Department
Faculty of Economics and Business, The University of Lampung
MANAGEMENT DEPARTMENT
FACULTY OF ECONOMICS AND BUSINESS THE UNIVERSITY OF LAMPUNG
THE IMPACT OF LOAN TO VALUE POLICY IMPLEMENTATION TOWARDS CAPITAL MARKET REACTION ON PROPERTY COMPANIES
ENLISTED IN IDX (Event Study)
Undergraduate Thesis
By:
SISKA MEILANDA SARI
MANAGEMENT DEPARTMENT
FACULTY OF ECONOMICS AND BUSINESS THE UNIVERSITY OF LAMPUNG
With hope blessing and guidance of Allah SWT, I would like to present my undergraduate thesis to:
My greatest parent, Purnomo and Alam Pasti
“There aren’t enough words in the world to express my appreciation, but I think this is a good start. Mom and Dad, you’ve been the best,I am nothing without love and
support from both of you.Mom, you are the most incredible people I ever know, I always say I’m strong but deep down inside I know that I can never be as strong as you. Thanks for everything. Dad, thank you for showing me what hard work looks like. For showing me that nothing comes easy, and that countless hours of blood, sweat and tears really does pay off. Even though you are no longer here but I know
you are smiling up there by seeing me achieved my ultimate achievement.As I’m growing up, I realize just how much Mom and Dad did for me. And for that, I need to
truly thank you. So this is for you guys. I love you Mom and I miss you Dad."
For my brother Anggiat Genta Saputa and my sister in law Endriyana Titi Sari "Thank you for all support since I still a little girl until now I have a title behind my
name. I am trying my best to make both of you proud."
My lovely niece, Balqis Septiara Putri
"Thank you for your existence. You’re one of the reason why I have to finish this undergraduate thesis, graduate and get a job. I love you, kid."
Myself,
"Thank you for your ignorance to all the distract things, beat the feel of laziness, heal the pain of being ignored, hold on when feeling down, cheer up when get disappointed. Here is your ultimate achievement. Remember, the future doesn’t wait. Make more money, get a better job, and improve life with a higher education degree."
My Alma mater,
iv LIST OF TABLE
Page
Table 1. Maximum Magnitude Determination of Loan to Value (LTV) for Credit
or Mortgages (KPR)... 23
Table 2. Previous Research ... 26
Table 3. Research Sample ... 31
Table 4. Calculated Result of Stock Expected Return Before and After Loan to
Value Policy Announcement ... 39
Table 5. Calculated Result of Average Abnormal Return of All Stocks Before and
After the Announcement of LTV Policy.... 42
Table 6. Calculated Result of Average Trading Volume Activity of All Stocks
Before and After The Announcement of LTV Policy ... 44
Table 7. Result of Descriptive Statistic Testing on Abnor Return and Trading
Volume Activity Before and After the Announcement of LTV Policy.. 45
Table 8. Result of Normality Testing on Average Abnormal Return Data Before
and After the Announcement of LTV Policy... 47
Table 9. Result of Normality Testing on Average Trading Volume Activity Data
Before and After the Announcement of LTV Policy... 47
Table 10. Result of Paired Sample T-Test of Abnormal Return Before and After
v Table 11. Result of Paired Sample T-Test of Trading Volume Activity Before and
MOTTO
“Langit tidak perlu menjelaskan bahwa dirinya tinggi. People know you are good if
you are good”
“Boleh jadi kamu membenci sesuatu, padahal ia amat baik bagimu, dan boleh jadi
(pula) kamu menyukai sesuatu, padahal ia amat buruk bagimu; Allah mengetahui,
sedangkan kamu tidak mengetahui.–Al-Baqarah, 216)
“One day I’ll be successful and people will ask me which college I went to. I’ll say,
PROLOGUE
Bismillahrrohmanirrohim,
Alhamdulillahirobbilalamin, all praise and gratitude shall be given to Allah SWT
which had gave the blessing and guidance, as of the writer may complete this
undergraduate thesis with the title“The Impact of Loan to Value Policy
Implementation towards Capital Market Reaction on Property Companies
Enlisted in IDX (Event Study)”.This undergraduate thesis is written as one of the
requirements to get Bachelor of Economics title in University of Lampung.
In writing this undergraduate thesis, the writer received the guidance, support,
encouragement, and suggestions from various parties, so that any difficulties can be
overcome with good.
On this opportunity, the writer express her gratitude to:
1. My beloved family. My Dad, Purnomo. My Mom, Alam Pasti. My brother,
Anggiat Genta Saputra. My sister in law, Endriyana Titi Sari, and my
beautiful niece Balqis Septiara Putri. Thank you for showing me true love in
its rarest form, what it feels like, and how it can extend beyondlife’s obstacles
and challenges. Because of your existence and support I can finish this
undergraduate thesis.
2. Prof. Dr. H. Satria Bangsawan, S.E., M.Si. as the Dean of Faculty of
3. Dr. Rr. Erlina, S.E., M.Si. as the Chief of Management Department in Faculty
of Economics and Business, The University of Lampung.
4. Ms. Yuningsih, S.E., M.M. as the Secretary of Management Department in
Faculty of Economics and Business, The University of Lampung.
5. Hj. Aida Sari, S.E., M.Si. as my academic advisor who have gave me so many
motivations and supports during college life.
6. Mr. Hidayat Wiweko, S.E., M.Si. as my advisor who had led, educate, gave
counsel, directing and gave advices in the writing process of this
undergraduate thesis.
7. Mr. Prakarsa Panji Negara, S.E., M.Si., as my co-advisor who had led,
educate, gave counsel, directing and gave advices in the writing process of
this undergraduate thesis.
8. Prof. Dr. Mahatma Kufepaksi, S.E., M.B.A. as the chief examiner who had
gave critics and advices on the writing of this undergraduate thesis. As well as
came to my previous seminars.
9. All lecturer and academic staff of Faculty of Economics and Business
University of Lampung.
10. Kemas Rahmat Zen Vani. Thank you for the help, motivations and supports
during college life until I can finish this bachelor thesis. You play an
important role in this achievement.
11. My beloved senior high school best friends. Agnes Uthami, Innez Regina,
Thama. Thank you for always be there when I need a source of laugh, thank
you for the support so I can finish this undergraduate thesis.
12. Management Bilingual Class class of 2012. Ayu Nadia, Marlia, Winy, Lele,
Ines, Laras, Reza, Fadil, Donna, Saput, Citra, Ikke, Ucang, Brenda, Elisa,
Baok, dan Abe. Thank you guys for the togetherness during college life. Your
cheesy jokes in classroom and during every presentation makes my life
sweeter. See you on top. I consider you guysas a family, so please don’t be
stranger.
13. My senior in Management batch 2011, Kak Ega, Kak Damar dan Kak Pandu,
thank you for helping me in writing this undergraduate thesis.
14. My lovely girls who always accompany me from the very first time of college
until I finished this undergraduate thesis, Deffa Trisetia, Selvi Rahayu, Meri,
Firdha, dan Rhenica.
15. All my friends in Financial Management. Rama Dewi, Albet, Sella, Ayu,
Dinda, Dewi, Rika, Ika, Endah, Delta, Susan, Liana, Yandi, and others. Thank
you for the motivations and advices during college and during the process of
writing this undergraduate thesis.
16. All my friends in Management class of 2012, Wahid Hidayat, Mpess, Hesta,
Ardi, Adri, Novi, Atsil, Akil, Naldo, Vicky, and others.
17. KKN family. Nung, Kak Friska, Mas Hen, Kak Aan, Kak Angga, dan Sipa
18. Zidane Satria Alfahri, Resky Mayang, Tante Lis, Zarra, Mbak Eka, Kak Idris,
Binda, Om Dani, Etek, dan Ibu Jaryati. Thank you for un-stopping supports
and motivations so I can finish this undergraduate thesis.
19. And every person who had gave contribution to the writer on completing this
undergraduate thesis who cannot be mentioned one by one. Thank you for all
of you.
The writer is aware that on the writing process of this undergraduate thesis there are
numbers of flaws and weaknesses. Because of that, every constructive inputs, critics
and advices is highly expected for the improvement of the next writing. Lastly, the
writer hoped that Allah SWT will return all of your kindness and hoped that this
undergraduate thesis will be beneficial for the writer in particular and all the reader in
general, amen.
Bandar Lampung, February 16th2016 Writer,
1. INTRODUCTION
1.1 Background
The property sector is one of the most important sectors that can be used as an
indicator to analyze the economic health of a country. Results of research
conducted by the Real Estate Developers Association of Indonesia (REI) and the
University of Indonesia in 2011 showed that the property sector accounted for
28% of economic growth in terms of consumption expenditure in the construction
sector. However, despite having high growth and a major contribution to
economic growth in Indonesia, the value of property in Indonesia alone in the last
few years have soared so high which is concerned to increase the price of property
assets in Indonesia, which does not reflect the actual price (bubble in property
values).
Mortgage loans (KPR) is a consumptive loans granted by the bank for the people
to have a home with guarantee or collateral of the house itself. The process of
granting mortgages itself includes various parties, which are banks, customers,
developers, government and Bank of Indonesia (BI) as a monetary policy makers
2
Hidayat in a research conducted by Setiawan and Mimba (2015) said that property
investment is an investment in buildings, land owned by the entity (lessee uses
finance lease) to earn rent income or capital gains on asset sales. There are several
reasons why Indonesia used as the location for property investment. First, the
political and economic stability in Indonesia is considered very helpful in creating
foreign investment climate in Indonesia which is currently increasing. Second,
society needs toward property is very high. Based on a survey conducted by the
Central Agency on Statistics (BPS), the housing needs in Indonesia reached
900,000 units per year with housing demand reach the number of 13 million units,
but the supply of housing available is only 80,000 units per year (BPS, 2012). The
unbalanced demand and the supply makes investment opportunities in property
sector becoming more promising for investors to make profits in the future. Third,
in the beginning of free trade known as the ASEAN Economic Community (AEC)
in 2015 which contribute in the increasing quantity of property requirements for
foreigners in Indonesia (Schreiben, 2013). This of course implies the property
asset price increases.
The growth in property sector which is extremely high becomes a concern to Bank
of Indonesia. According to Residential Property Price Survey on first quarter in
2013, the funding sources composition of property establishment is equal to
33.71% funding for establishment on property industry which comes from loan
from Bank of Indonesia (Residential Property Price Survey, 2013). If later the
property industry collapse because the property price experiencing a bubble is
corrected on the market which make property price fall below its intrinsic value,
3
growth in property prices and mortgage growth is reinforced with additional
information on the ground that there is a property purchase in bulk (more than 1
unit, even 10 units at a time), either using a mortgage or by cash /cash gradually.
Data of Information Debtor System (SID) per April 2013 indicates that there are
35.298 borrowers have a mortgage facility more than one (about 4.6% of the total
mortgage debtors). With such behavior, the demand for housing is expected to
continue to increase and it is feared to continue pushing the house prices up. The
increase in price is quite high and it may trigger the event of financial instability if
there is "failure to pay" by the people who use banking services as a source of
financing in the purchase of property.
Bank of Indonesia issued Circular Letter No.15/40/DKMP dated 24 September
2013 to all commercial banks in Indonesia about the policy of limiting the loan to
value (LTV) in granting mortgages property, property-backed loans consumer
financing in order to maintain the stability of the financial system and strengthen
banking system. This regulation regulate the determination of the amount of the
loan to value on the property collateralized loans and mortgage the property, as
well as the down payment for motor vehicle loans. Loan to value ratio or
financing to value, or called LTV or FTV, is the ratio between the value of the
credit or financing that may be provided by the Bank to the value of collateral
property at the time of credit or financing based on the price of the last assessment
(Bank Indonesia Circular Letter No.15/40/DKMP). The impact of the
implementation of LTV policy is that people should pay a higher deposit (down
payment) mortgage to buy a house, thismatter will affect the community’ ability
4
Survey conducted by Bank of Indonesia in 2013 about the volume of residential
property sales in the fourth quarter of 2013 showed there is a slowed down
especially for small type as a result of the policy of the loan to value (LTV). A
slowdown in property sales is also reflected in the slowing of the distribution of
mortgage in the fourth quarter of 2013. The decline in demand for property will
affect the performance of the company so that the company's profitability to
decline, the consequences will affect the stock price changes in the property
sector.
Source: www.yahoofinance.com
Figure 1 Jakarta Composite Index and Sectoral Stock Price Chart Movement on Research Period
Figure 1 shows that the JCI (Jakarta Composite Index) and IHSS (Sectoral Stock
Price) before and after the implementation of LTV looks aligned and relatively
5
policy stock prices both sectoral and JCI stock prices tend to decline or adversely
towards LTV policy. However, prices stabilized in the next weeks.
Loan to value policy is a policy adopted by Bank Indonesia to hold the excessive
growth in the property sector and improve the prudential aspects of banks in
lending properties (increase in the risk management aspect). The circular letter
No. 15/40/DKMP issued on September 24, 2013 were revised from LTV
restriction policy in 2012 because they are still less stringent and not been able to
suppress the growth of motor vehicle loans and Non Performing Loan (NPL)
nominal. NPL is the percentage of non-performing loans (substandard, doubtful,
loss) to total loans. Bank Indonesia expects NPLs maximum of 5%.
Reason Bank of Indonesia issued Bank of Indonesia Circular Letter
No.15/40/DKMP are as follows; First, the increased demand for housing loans
(KPR) and credit of motor vehicles (KKB), so banks need vigilance in lending.
Second, the growth of housing loans that are too high can cause bubble or a rise in
asset property price that does not indicate the actual price of the asset. Third, this
rule arises is intended to protect the economy in order to remain productive and
able to face the challenges of the financial sector in the future, it needs policies
that can strengthen the resilience of the financial sector to reduce the sources of
vulnerability that can occur, including excessive growth in mortgages and vehicle
loans. Fourth, this policy was made in order to increase the prudence of bank in
granting credit or financing property ownership, property-backed consumer loans,
as well as to strengthen the resilience of the financial sector by setting the amount
6
policy is created by means to increase bank circumspection on credit loaning or
property ownership funding, property backed consumption credit, as well as
strengthening financial sector’ resilience which done through loan to value or
financing to value establishment (Bank Indonesia, 2013).
Marzuki in Anoraga (2003) capital markets is complementary in the financial
sector towards the other two institutions, namely banks and financial institutions.
The existence of capital market in Indonesia has been very important for
economic activities in Indonesia. In trading activity in the capital markets,
information is one of the important factors to be known by market participants.
Therefore, the public information on LTV will affect investor decisions in
particular investors who own bank and property stocks. Market reaction to the
public announcements are indicated by changes in stock prices as measured by
using the return as the value of changes in prices or by using abnormal return
(Jogiyanto, 2010). Abnormal return is the difference between the actual return and
the expected return.
Rokhman (2009) said active stock trading can increase the volume of trade and
shows that the stock is favored by investors. When the announcement of the
implementation of LTV policy has information content which is beneficial it will
affect the stocks that comes from changes in trading volume activity. Changes in
trading volume measured by trading volume activity (TVA) by comparing the
number of stocks traded at a certain period. If there are significant differences
7
Loan to value policy implementation inGunanta’s research(2012) have an impact
in the stock price on property’sstocks and have a significant market reaction
towards the announcement of LTV policy. While in the research conducted by
Setiawan and Mimba (2015) there is a significant market reaction to the
announcement which on the day t-1, t-0, and t + 2. For paired samples t-test
showed that there is no difference of market reaction before and after the
announcement of loan to value policy. Implementation of loan to value policy in a
research by Bei (2015) also suggest that there is market reaction which shown on
abnormal return and changes in trading volume activity on property stocks on the
period before to when and when-after.
Therefore, this research titled“THE IMPACT OF LOAN TO VALUE
POLICY IMPLEMENTATION TOWARDS CAPITAL MARKET
REACTION ON PROPERTY COMPANIESENLISTED IN BEI”(Event
Study)
1.2 Problem Formulation
From the background of the problems, the issues to be discussed in this research
are:
1. Is there a significant difference in abnormal return on property companies
sector listed in BEI before and after the announcement of loan to value policy
8
2. Is there a significant difference in trading volume activity in the property
companies sector listed on the BEI before and after the announcement of loan
to value policy conducted by Bank Indonesia?
1.3 Research Objectives
From the formulation of the problems above, the purpose of this research are:
1. To determine whether there is a significant difference in abnormal return on
property companies listed on BEI before and after the announcement of the
loan to value policy conducted by Bank Indonesia.
2. To determine there is a significant difference on trading volume activity on
property companies listed on BEI before and after the announcement of the
loan to value policy conducted by Bank Indonesia.
1.4 Research Benefits
The benefits that can be gained with the implementation of this research are:
1. For Investors
Results of this research is expected to provide information on the impact of
the loan to value policy implemented by Bank Indonesia, especially in stocks
of property companies in the Indonesia Stock Exchange.
2. For Other Researcher
9
1.5 Research Framework
Loan to value ratio which is a policy implemented by Bank Indonesia is the ratio
between the value of the credit or financing that may be provided by banks toward
the collateral value of the property at the time of credit or financing based on the
price of the last assessment.
Issues raised in the study which is to determine whether there is an effect of the
Loanto value (LTV) policy implementation to the reaction of the capital market in
Indonesia Stock Exchange (BEI) particularly in the stocks of property companies,
using indicators of abnormal return and trading volume activity which is
examined using event study.
Jogiyanto (2010), stated that the event study is a study of the market reaction to an
event that information is published as an announcement. In the event study, the
market reaction is measured by calculating the abnormal return.
The implementation of LTV policy also affects the liquidity of stocks that can be
seen from trading volume activity. When the announcement of the implementation
of LTV policy has information content which is beneficial it will affect the stock
that comes from changes in trading volume activity.
Time period used in this study is 30 days with the window period of 15 days
before the announcement of the Loan to value policy and 15 days after the
10
Based on the background of the problems and objectives that have been
mentioned in the previous section, it can be made in the framework of this
research as follows:
Figure 2: Research Framework
1.6 Hypothesis
Hypothesis testing conducted in order to determine whether there is a difference
of abnormal return and trading volume activity in the property companies before
and after the announcement of the Loanto value policy. Thus, based on the The announcement of loan to value policy
Paired Sample T-Test
Property companies listed on the Indonesia
11
explanation of the background and the problems that have been formulated, the
hypothesis to be studied is as follows:
H1 : Allegedly there is a significant difference on abnormal returns in property
companies listed on the Indonesia Stock Exchange before and after the LTV
policy announcement conducted by Bank Indonesia.
H2 : Allegedly there is a significant difference on trading volume activity in
property companies listed on the Indonesia Stock Exchange before and after
II. LITERATURE REVIEW
2.1 Capital Market
Indonesian capital market plays an important role in mobilizing funds to support
the growth of the national economy. The main target is to increase work
productivity through business expansion and revamping capital structure to
enhance enterprise competitiveness.
Husnan (2001) said the capital market is the market for the various long-term
financial instruments (securities) that can be traded, either in the form of debt and
equity capital, whether issued by governments, public authorities, and private
companies. The capital market is a means of funding for companies and other
institutions (government), and as a means for investing activities for the
community.
2.2 Capital Market Efficiency
In trading activity in the capital markets, information is one of the important
factors to be known by market participants. Information on the capital market is
✁
portfolio. There are variety of information published in capital market whether
information that affects some companies and information that have an impact on
all companies in the capital market.
An efficient market is a market where the price of all securities traded reflected all
available information (Tandelilin, 2007). According to Husnan (2001), an
efficient capital market is a market that the prices of the securities already reflect
all relevant information. The faster the new information is reflected in securities
prices, the more efficient the market. Thus it would be very difficult for investors
to gain profit over the normal level consistently while doing trade transactions on
the Stock Exchange. Some of the conditions that must be met to achieve an
efficient market, are: 1. There are many investors who are rational and strive to
maximize profits, 2. All market participants can obtain information at the same
time in a way that is easy and inexpensive, 3. Information that occurs is random,
4. Investors react quickly to new information, so prices securities change
according to changes in the actual value due to such information.
According to Fama in Jogiyanto (2010) the form efficient market can be grouped
into three, known as the efficient market hypothesis:
1. The Weak Efficient Market Hypothesis
Market efficiency is said to be weak (weak-form) because the
decision-making process of selling and buying stock the investors use price data and
volume of the past. Based on past price and volume the various models of
technical analysis used to determine the price, whether the direction of price
✂ ✄
decided to buy. If the direction of the price will go down, it was decided to
sell. Technical analysis assumes that stock prices always recur, which after
rising in a few days, it will certainly go down in the next few days, then up
again and down again, and so on.
2. The Semistrong Efficient Market Hypothesis
Market efficiency is said to be the half strong (semi strong-form) because the
decision-making process selling - buying stock the investors use past price
data, the volume of the past, and all published information such as financial
reports, annual reports, announcements exchanges, financial information
internationally, government regulations, political events, and other things that
can affect the national economy. This means that investors use a combination
of technical analysis and fundamental analysis in the process of calculating
the value of the stocks, which will be used as a a guide in the purchase price
bid and offer prices.
3. The Strong Efficient Market Hypothesis
Market efficiency is said to be strong (strong-form) as investors using more
complete data, that is: the price of the past, the volume of the past, the
information published and unpublished private information in general.
Calculation of price estimated by using information that is expected to
generate more sales decisions - to buy stocks more precise and higher return.
Here are some strong form market efficiency indicators:
a. Profits earned is very thin due to the low price fluctuations.
☎ ✆
c. Symmetric information that investors have an equal opportunity to obtain
information.
d. Investor analysis capabilities relatively different.
e. Markets react quickly to new information.
2.3 Stock Return
Tandelilin (2001) stated return is the profit earned by the investor of the
investment. One thing that is very reasonable if investors demanded a certain level
of return on funds that have been invested. In the context of investment
management, it is necessary to distinguish between the expected return and the
actual return. Actual return is the rate of return that has been obtained by the
investor. While the expected return is the rate of return anticipated by the
investors in the future, so the nature of expected return has not occurred. Actual
return a capital gain/loss is the difference between the current stock price period
( ) with stock prices in the previous period ( ). Mathematically return
realization can be formulated as follows (Jogiyanto, 2010).
=
Explanation:
= rate of stock return
= stock prices in the period t
✝6
While the expected return can be calculated using 3 estimation models (Jogiyanto,
2010) :
1. Mean Adjusted Model
Mean adjusted model assumes that the expected return is constant, that is
equal to the mean value of previous actual return during the estimation
period, as follows:
[ ] =
Explanation :
[ ] = securities expected return i on t period
= securities actual return i on j period
T = the span of estimation period from t1 until t2
The estimation period is generally a period before the event. Event period
also called the observation period or event window.
2. Market Model
The calculation of expected return using market model done in two stages :
1. Form the expectation models using realization data during the estimation
period.
2. Using this model of expectation to estimate the return in the window
period.
Model expecatations can be formed using the OLS regression techniques
17
= i + i.
Explanation :
= securities actual return i on j period
αi = intercept for i securities
βi = coefficient slope which is Beta from i securities
= market return index on estimated j period
3. Market Adjusted Model
This model assumes that the best predictor for estimating the returns of a
security is the market index return at that time. By using this model, it is not
necessary to use the estimation period to form estimation model because
securities estimated return is the same as the market index. Market index that
can be chosen for IDX market, for example Composite Stock Price Index
(IHSG). Return market index can be calculated using the following formula
(Jogiyanto, 2010):
=( )
Explanation :
= market return
= market price indeks in t period
18
Other expected return calculation models :
a. Capital Asset Pricing Model (CAPM)
Expected return measured by considering the market return and risk-free
interest rate. CAPM model is used as the basis for calculating the expected
return is as follows :
( ) = = ( )
Explanation :
= risk free rate
= market return
= beta of each stocks which calculated using interpolation with
daily return data
Capital Asset Pricing Model (CAPM) has several weaknesses which
include (Andyono, 2009):
1. Model CAPM calculate the expected return of an asset, but using
historical return data (actual) that cause bias in the calculation..
2. The CAPM is a single-period models where testing is done in a matter
of months or years. However, in the meantime there are a lot of
economic fluctuations that cause noise in the results.
3. Market risk premium and beta must be constant in the period.
The expected stock returns (expected return) is the expected revenue from a stock
in the future, in accordance with the risk level of the stock. Before calculating the
19
regressing with Rmt during the period. Calculating the normal return by
using alpha and beta values that previously calculated, while market return used is
the market return during the research period.
2.4 Abnormal Return
According Jogiyanto (2010) abnormal returns is the difference between the actual
return happens with the expected return. Abnormal return is the difference
between the actual return and expected return that may occur before the official
published information or the information leak has occurred before the official
information published (Samsul, 2006). According to Samsul (2006), to calculate
abnormal return of i stock on t day, can use this following formula:
= ( )
Explanation :
= securuities abnormal return i on t event
= securuities actual return i on t event
( ) = securuities expected return i on t event
2.4.1 Types of Abnormal Return
Abnormal return can be classified into 4 groups (Samsul, 2006) :
a. Abnormal Return (AR)
Abnormal return happens every day in every type of stock, which is the
20
a daily basis. Because it is calculated daily, then within a window period it
can be seen which stock that has highs or lows abnormal return, and may
also be known on what day the most powerful reactions occur in each type
of stock.
b. Average Abnormal Return (AAR)
Average abnormal return is the average - average abnormal return (AR) of
all types of stocks that are being analyzed on a daily basis. AAR can show
the strongest reactions, both positive and negative, of all types of stocks on
a certain days during the window period.
c. Cummulative Abnormal Return (CAR)
Cummulative abnormal return is a daily cumulative AR from the first day
untilthe next day of every types of stock. So the CAR during the period
before the event will be compared with the CAR during the period after
the event.
d. Cummulative Average Abnormal Return (CAAR)
Cummulative average abnormal return is a daily cumulative of AAR from
the first day until the next day. From the graph of CAAR it can be seen
daily the tendency of increase or decrease that occurred during the window
period, so the positive or negative impact from the events to the overall
21
2.5 Trading Volume Activity
Trading volume activity is the ratio between the number of stocks traded by the
number of stocks outstanding during a particular period. Trading volume activity
(TVA) is used as an indicator of the liquidity of a stock.
Trading volume is the number of stocks traded in a single trading day. In terms of
its function, it can be said that the trading volume activity is a variation of the
event study. Trading volume activity approach can be used to test the weak form
efficient market hypothesis because in the markets that are not efficient or
efficient in the weak form, the price change is not immediately reflect the
available information so that researchers could only observe the reaction of the
capital market through movement trading volume on the capital markets studied
(Sunur, 2006). According to Mulatsih (2009), to calculate trading volume activity
of a stock can use this following formula:
= the amount of stocks from company i traded on t time
the amount outstanding stocks from i company on t time
2.6 Loan to Value
Definition of loan to value according to Investopedia is a lending risk assessment
ratio that financial institutions and others lenders examine before approving a
mortgage. Meanwhile, according to Justin Pritchard (The New York Times
Company), loan to value tells you how much of a property is being financed. It is
22
ratio between the loan value with the estimated value of assets which is used as
collateral. Related to loan to value the problem is about mortgage (KPR).
Ratios loan to value or financing to value, hereinafter called LTV or FTV, is the
ratio between the value of the credit or financing that may be provided by the
Bank to the value of collateral property at the time of credit or financing based on
the price of the last assessment (Bank Indonesia Circular Letter
No.15/40/DKMP). Loan to value policy tightening issued by Bank Indonesia to
anticipate and minimalize growth in mortgages and properties that are too high
may encourage an increase in the price of property assets that do not reflect the
actual price, thus increasing credit risk for banks with large exposure to property
loans.
Under Circular No. 15/40/DKMP scope of the policy applied to commercial banks
that provide mortgages or property. The calculation of a credit value and the value
of collateral in calculating the LTV for commercial banks are:
a. Credit value is determined based on a credit limit that is received by the debtor
as specified in the credit agreement.
b. Collateral value is determined based on the estimated value of the bank against
the collateral property to the guidelines on Bank Indonesia regulation
23
Table 2.1 Maximum Magnitude Determination of Loan to Value (LTV) for Credit or Mortgages (KPR)
No. Credit Facility or Funding to: Building Area The Magnitude of LTV
Source: Bank Indonesia Circular Letter No.15/40/DKMP
2.7 Capital Market Reaction to The Announcement of Loan to Value
Policy Implementation
The market will react to the events that contain informations. The market reacted
because of the events contains an information that has economic value that could
affect the value of the company. This information will provide a signal for
investors in making decision for investment so it is also take effect toward the
fluctuations in price and trading volume in the capital market. If the market
(investors) and public considers the information of implementation LTV policy as
good news for the property and banking sectors, the market will respond by
buying stocks of the banking and property sectors as the stock price will rise, so
the return obtained is also high.
Society and investors believe with company's performance and trust to invest their
capital in capital market. That is means the implementation of LTV policies will
have a good influence for the company and in the long term it can be a good
24
However, if the market (investors) and public considers that the information of the
implementation LTV policy as bad news for the property and banking sectors, the
market will respond by selling the property and banking sector stocks because
stock prices will fall, so the return earned also decreased. Society and investors
considered that the implementation of LTV policies have a bad effect on the
performance of the banking sector and property, so that the society decided not to
invest especially in banks and property stocks. If public and investor trust to the
company decreases it will affect the performance of the company and of course
have a negative impact on the economy
The implementation of LTV policy impacted on the distribution of housing loans
or property. With the decline in mortgage, it is successfully suppress the growth
of property loans and reduce the risk of non-performing loan (NPL). Credit
growth is reduced because consumers have to pay a higher down payment. This is
why people are afraid to make loans to banking institutions for disrupting the
ability of the consumer installment.
The implementation of loan to value (LTV) policy by the central bank to
commercial banks on 24 September 2013 causing a decrease in lending facility
(mortgage). The reduced of mortgage distribution caused the demand for property
decreases. Based on Residential Property Price Survey on quarter VI in 2013
conducted by Bank of Indonesia, it is suggesting that the mortgage remains the
main source of financing the purchase of residential property. The impact of
policy implementation LTV according to mass media will affect the value of the
25
purchasing power. This condition will affect the company's performance and it
will caused the profitability of the company and it is expected to decrease the
price of property stocks and property stocks trading volume.
Hersini (2013) stated by the issuance of Bank Indonesia's policy, is expected to
have an impact on decline in housing units sales volume. This was caused by the
declining consumer purchasing power due to increased down payments. The
declining sales also give a ripple effect on the property sector as a provider of
property. Developer target sales assigned at the beginning of the year in order to
improve the profit are threatened cannot be reached, resulting in the declining in
the profitability of the company. This decrease will affect the performance of the
property and it is expected to affect the stock price as well as expectations of
investors toward property stocks in obtaining the return in the future.
2.8 Event Study
Jogiyanto (2010), stated event study is the study of market reaction to an event
that the information is published as an announcement. Event study is a research
technique that allows the researchers to assess and learn the effect of an event on
stock prices in the capital market. Event study can also be used as an analytical
tool to know is there any significant reaction in capital market toward events
which can influence the stock price of a company in the capital market. For test
the information content it is more focused on monitoring the market reaction due
26
expected that there will be a reaction in the market at the time when the
announcement was accepted by the market.
The market reaction is characterized by changes in the price of concerned
securities. The market reaction can be measured by using the return as the value of
changes in prices or by using abnormal return. If the abnormal return is used to
measure the reaction then an announcement that has information content is
expected to deliver the abnormal return to the market. Otherwise, if an
announcement does not contain information that can be said it is not give
abnormal return on the market. So based on that definition, event study
methodology can be used to see the reaction of the capital market, which is
reflected in the company' stock price, for a particular event.
2.9 Previous Research
In this research, the researchers tried to examine the effect of loan to value policy
implementation towards capital market in property companies enlisted in IDX.
Some of the results of previous studies related to this research are as follows:
Table 2. Previous Research
Researcher Title Variable Result
27
Impact of the Loan to Value Regulation Limitation towards Property Stock Price
III. RESEARCH METHODOLOGY
3.1 Type of Research
This research is an event study which is a research technique that allows
researchers to assess the impact of a particular event on the company's stock price.
This research will be done within a period of 30 days with the window period for
15 days before and 15 days after the announcement of loan to value policy
conducted by Bank of Indonesia.
3.2 Type of Data
The data used in this research is secondary data obtained via internet through the
sites of securities to get daily stock price data. Secondary data are data that are not
directly obtained from the first party. The necessary data in this study consist of
daily closing price data, daily stock price of the property sector, daily trading
volumes, the number of outstanding shares, and market index of IDX (JCI) during
30
3.3 Data Collection Methods
1. Literature Research
Research literature means read a variety of literature, references, and financial
journals both in the form of books, magazines, newspapers, and news on the
internet and learn the theories associated with this research.
2. Field Research
Field research conducted by visiting the sites related to the Indonesian capital
market. The method used is the method of documentation, that collect data
and recording the necessary data in this research.
3.4 Population and Sample
The population used in this research are all property stocks listed on the Indonesia
Stock Exchange (IDX) and 10 samples was taken with purposive sampling
method. Criteria for sample selection is a property company which the stocks are
listed on the Indonesia Stock Exchange (IDX) in the period of research and see
the change in the stock price of the property sector during the period of research
because there are some stocks that are categorized as“sleepingstocks”which the
31
Table 3. Research Sample
No. Company Name Stock Code
1. PT Alam Sutera Realty Tbk ASRI
2. PT Bumi Serpong Damai Tbk. BSDE
3. PT Ciputra Developmnent Tbk. CTRA
4. PT Ciputra Property Tbk. CTRP
5. PT Ciputra Surya Tbk. CTRS
6. PT Lippo Cikarang Tbk. LPCK
7. PT Lippo Karawaci Tbk. LPKR
8. PT Moderland Realty Ltd. Tbk. MDLN
9. PT MetropolitanLand Tbk. MTLA
10 PT Pakuwon Jati Tbk. PWON
The research period is 30 days with the window period of 15 days before and 15
days after the announcement of the implementation of the loan to value policy.
3.5 Operational Definition of Variable
The variables that will be analyzed in this research consisted of the dependent
variables and independent variable, which will explain the impact of the abnormal
return and trading volume in property companies listed on the Indonesia Stock
Exchange on loan to value policy announcement by Bank Indonesia.
• Dependent Variables
• According Jogiyanto (2010) abnormal return is the difference between the
actual return of stock with the expected return of stock. Jogiyanto (2010),
to calculate the abnormal return of i stock on t day can use the following
formula:
32
• Trading volume activity is the number of stocks within a certain period.
Trading volume activity (TVA) is used as an indicator of the liquidity of a
stock. The formula for calculating the TVA according Mulatsih (2009) is
as follows :
✟
✠ ✡☛☞ ✌✍✎ ✏ ✠✍✑✒ ✠ ✍✓✔✒✑✕ ✍✌✓✍ ✌✖☞✏✗✘✠✕ ☞✙ ☛✙✍✏✠✠✘ ✌☛
✠ ✡☛☞ ✌✍✎ ✏ ✠✍✎✠✒ ✠☞ ✏✙ ✘ ✏✚✒ ✠ ✍✓✔✒✑✕ ✍✌✘✓ ✍✌✖ ☞ ✏ ✗✍✏✠✠✘ ✌☛
• Independent Variable
The independent variable in this reserach is the loan to value policy. loan to
value or LTV is the ratio between the value of credit that can be granted by the
lender (bank) to the value of collateral in the form of property during the
beginning of the loan that based on the price of the last assessment (Bank of
Indonesia, 2013).
3.6 Data Analysis Methods
1. Qualitative Analysis
Qualitative analysis done by using the existing theories and approaches
related to the research to solve problems and explain the problems with the
data obtained that will be used in this research.
2. Quantitative Analysis
− Abnormal return analysis method:
a. Calculate the daily actual return of stock during the period of research
(Jogiyanto, 2010):
33
Explanation :
R = rate of return of the stock
= price of stock on t period
= stock price on previous t-1 period
b. Calculate the expected return with market-adjusted model by using the
following formula (Jogiyanto, 2010):
✢
( ✣ )
Explanation :
= IHSG t period
= IHSG t-1 period
c. Calculate the abnormal return using this formula (Jogiyanto, 2010) :
✢ ✣ ( )
Explanation :
= abnormal return i security on t period
= rate of return i security on t period
( ) = expected return i security on t period
d. Calculate average abnormal return of each stock during the period of
research using this formula (Suryawijaya in Bei, 2015):
34
✤
e. Calculate average abnormal return for all stocks during the period of
research (Jogiyanto, 2010) :
✤
Explanation :
= average abnormal return of i stock on t period
= abnormal return of i stock on t period
= number of period
− Trading volume activity analysis method:
a. Calculate the TVA of each stock during the period of research (Mulatsih,
2009):
✥
✦ ★✩✪✫✬✭ ✮✦✬✯✰✦ ✬✱✲ ✰✯✳ ✬✫✱ ✬✫✴ ✪✮✵✶✦ ✳ ✪✷✩ ✷✬✮✦✦ ✶ ✫✩
✦ ★✩✪✫✬✭ ✮✦✬✭ ✦ ✰✦ ✪✮ ✷ ✶✮✸✰✦ ✬✱✲ ✰✯✳ ✬ ✫✶✱ ✬✫✴ ✪✮✵✬✮✦✦ ✶ ✫✩
b. Calculate average TVA each stock during the period of research
(Suryawijaya in Bei, 2015):
✤
35
c. Calculate average TVA of all stocks during the period of research
(Suryawijaya in Bei, 2015):
✹
3.7 Hypothesis Testing
The steps in conducting statistical hypothesis testing are as follows:
1. Formulate the hypothesis :
Hypothesis 1 :
• Ho : Allegedly there is no significant difference on abnormal returns in
property companies listed on the Indonesia Stock Exchange before and
after the LTV policy announcement conducted by Bank Indonesia.
• Ha : Allegedly there is a significant difference on abnormal returns in
property companies listed on the Indonesia Stock Exchange before and
after the LTV policy announcement conducted by Bank Indonesia.
Hypothesis 2 :
• Ho : Allegedly there is no significant difference on trading volume activity
in property companies listed on the Indonesia Stock Exchange before and
after the LTV policy announcement conducted by Bank Indonesia.
• Ha : Allegedly there is a significant difference on trading volume activity
in property companies listed on the Indonesia Stock Exchange before and
36
2. Determine the selection of statistical test
• Normality Test
Before testing the hypothesis, firstly test the normality of the data which
are the data abnormal return and trading volume activity. To see whether
the data were normally distributed or not. Normality testing of data using
statistical tools SPSS which is Kolmogorov-Smirnov test. Criteria for
normality test is if the probability values> level of significant (α = 5%)
then the data is normally distributed, otherwise if the probability value <
level of significant (α = 5%)then the data is not normally distributed.
• Paired Sample T-Test
This test is conducted to determine whether there are significant
differences in abnormal return and trading volume activity as a result of
the implementation of the policy loan to value. This testing process using
SPSS. The researcheruses a confidence level of 95% or α = 5% with the
following criteria:
• If the probability value < level of significant (α = 5%) it can be
concluded that Ho refused and Ha accepted which means that there
are significant differences.
• If the probability value> level of significant (α = 5%) it can be
concluded that Ho is accepted and Ha rejected, which means there are
V. CONCLUSION AND SUGGESTION
5.1 Conclusion
Based on the analysis of data and the results of the discussion that has been done
in previous chapters, it can be concluded that:
1. The announcement of the loan to value policy implementation has no effect
towards abnormal return on property stock. This means that the information
of the announcement of loan to value policy implementation has been
absorbed by the market or investor so that the market does not react to events
LTV policy implementation.
2. The announcement of loan to value policy implementation affected the
trading volume activity of property stock. This means that investors consider
the announcement of LTV policy implementation has information content so
that the market reacted to the implementation of LTV policy which can be
seen from the declining in the stock trading volume. The declining of TVA
average is because investors consider the implementation of LTV as bad news
so investors decided to release their shares as investors felt the
implementation of LTV policy will result in falling stock prices and stock
✺✺
3. The information of loan to value policy implementation only affect the
transactions in the stock market, especially on the property stock but not
affect the return of the property stock.
5.2 Suggestions
After getting the results of the conclusions above, the researchers propose
suggestions for future research as follows:
• For the investor, it is better to make decisions not only see events such as the
announcement of the implementation of LTV policy, but also pay attention to
other external factors that may affect the price of stocks on the capital market,
as consideration in the decision to invest in the capital market.
• For the next researcher who will conduct similar research in order to develop
the research by conducting research on the impact of LTV policy
implementation towards other sectors companies with a larger sample.
• For the next researcher also will conduct similar research in order to use
different methods of calculating the expected return in addition to those
already used in this study. Similar research with different calculation methods
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