Sunardi, Sunardi, Noviolla, Christiana, Supramono, Supramono and Hermanto, Yustinus Budi (2023) Stock market reaction to government policy on determining coal selling price. Heliyon, 9 (2). pp. 1-14. ISSN 2405 8440

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Abstract

The objectives of this study are to analyze the market response by: (a) examining the consequences of the domestic market obligation (DMO) on coal prices policy on the difference in abnormal return (AR) prior to and after the announcement; (b) determine the effect of DMO policy announcements on coal prices on trading volume activity (TVA). This research examined daily stock returns on the shares of 19 coal companies listed on the Stock Exchange in 2018, ten days before and after the DMO announcement (February 23 to March 23, 2018). Statistical analysis was used to calculate the average abnormal return (AAR) and trading volume activity (TVA). The results showed that the announcement of domestic market obligation (DMO) received a negative response from the market. This study also found that the abnormal return was negative eight days before the DMO announcement. This study also finds the cause of overreaction in the short term, namely a significant price reversal process immediately after the announcement of the DMO. The paired sample t-test found an insignificant difference in abnormal returns after or before the announcement of the DMO on coal prices policy on companies listed on the IDX for the 2018 period. While testing the TVA, a significant difference was found before and after the announcement of the coal DMO selling price policy.

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