STOCK PERFORMANCE BEFORE AND AFTER RIGHT ISSUE IN INDONESIA

A right issue is the subsequent stock offerings that give priority to the existing shareholders to buy new shares at a specified price and time. There are several reasons why a firm does the right issue, for example, to raise the firm’s capital, investment expansion, or to pay the debt. The objective of this study is to analyze the effect of the right issue on the abnormal return of the company. This research uses secondary data from the Indonesia Stock Exchange from 2014 to 2016. A sample of 18 firms met the criteria selection. The results show that there is no abnormal return in the days surrounding the right issue announcement. The results also find that abnormal stock return in the days after right issue announcement is not lower or equal to the days before the right issue announcement.


INTRODUCTION
The capital market is a market to trades securities which generally have more than one year of age, such as stocks and bonds (Tandelilin, 2010). According to Fahmi and Hadi (2009), the definition of the capital market is a place for various parties, especially companies sell stocks and bonds, with the aim of the sale will be used as additional funds or strengthen company capital. Like the traditional market, the capital market is a mean to bridge parties who have excess funds (investors) and those who need funds (issuers).
The existence of the capital market has the benefits from two parties. First, in terms of companies that need funds, the capital market can be used as a source of funds.
Second, in terms of investors, the presence of capital markets can be used as a means to channel funds (investment), so that income will be obtained called investment gains in the form of capital gains and dividends to invest in the stock market. Many companies offer shares to the public outside the initial public offering (IPO). This action is done by companies that need additional funds to finance business activities or to pay debts that are due. Activities carried out by the company are commonly known as right issue.
The right issue is a subsequent stock offering that gives priority to existing shareholders to buy new shares at a specific price and time (Raja, 2012). In other words, the company distributes option rights to shareholders in order to obtain new shares at special price. Eckbo and Masulis (1992) stated that companies with concentrated stock ownership would tend to use the right issue to obtain additional capital. there are positive abnormal returns in the days around the right issue announcement in India and Pakistan. Suresha and Naidu (2012) in India and Otieno and Oching (2015) in Kenya found the negative abnormal returns on the date of the announcement of the right issue. Raja (2012) found that there was a difference in abnormal return before and after the right issue in India. On the other hand, Ogada and Kalunda (2017)

Descriptive Statistics
Abnormal return is the difference between the actual rate of return and the expected rate of return. Table 1 presents descriptive statistics of abnormal returns before and after the right issue announcement. Table 1 shows that the average abnormal return before and after the announcement of the right issue as a whole is -0.00626 or -0.       Table 3. In Table 4, it is known that the Z value is -0.889 (p-value = 0.186), because p-value is higher than the significance levels, then the second hypothesis is rejected. In other words, abnormal returns in the days after the announcement of the right issue are not lower or equal to the days before the announcement of the right issue. This study finds evidence that the announcement of the right issue does not affect abnormal returns There are two days where the abnormal returns are significant at the level of 10%, namely day -3 and +5, but the abnormal returns are negative. This study finds that there are no abnormal returns in the days around the announcement of the right issue.

Normality Test of Data
This study indicates that investors give mixed reactions to the announcement of the right issue. The abnormal returns in the days after the announcement of the right issue are not lower or equal to the days before the right issue announcement. The information of the right issue does not affect abnormal returns.

CONCLUSION
This study implies that the investors do not need to consider the right issue as a benchmark for investment in the capital market. Future studies should be conducted with a more extended observation period so that the sample will get more. Another suggestion is the use of the capital asset pricing model and Fama-French three-factor model (Sutrisno and Nasri, 2018) to calculate expected return.