Sarumpaet, Susi and Hendrawaty, Ernie (2017) Market reactions to corporate unethical behaviors: A study from Indonesia. In: The 18th Asian Academic Accounting Association Conference (2017), 22-23 November 2017, Bali. (Submitted)

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Official URL: https://foura.org/index.php/event-blog/844-bali-in...

Abstract

This research examines market reactions to unethical corporate behaviors. An event study was conducted to detect the presence of abnormal returns during the releases of media news regarding unethical practices of Indonesian listed companies in environmental, social and financial aspects. The examples of unfavorable environmental practices are illegal lodging, forest fires, and pollutions, while in social aspects it includes labor strikes and lay-offs, market monopoly, and similar practices. Unethical practices in financial aspect includes frauds and tax evasions. Prior studies from more developed nations have been widely documented in the literature. However, the use of media reports of three different aspects to measure the event is new to the study. The results of prior studies, which mostly come from developed markets, have also been inconclusive. The use of a sample from a developing market is expected to provide distinct contribution to the existing literature. The results show that Indonesian stock market responded to media news regarding corporate unethical behaviors, particularly in social aspect, as indicated by negative abnormal returns in the third day after the news releases by prominent online newspapers, Kompas. When such information is split into each category, namely: environmental, social, financial information, the result is only consistent for social issues. Negative abnormal returns occurred on the third day after the media reports of unethical social behaviors of the sample firms. However, we did not find significant market responses to media reports of unfavorable financial and environmental practices by the sample companies. Using paired sample t-tests to examine the market response before and after the event, this study only finds significant difference in cumulative abnormal returns for unfavorable social practices. In general this study offers an empirical evidence that media reports on CSR issues have information content, especially for firms reported as having problems in maintaining social responsibility. Keywords: abnormal returns, developing market, Indonesia, market reaction, share price, unethical behaviour

Item Type: Conference or Workshop Item (Paper)
Subjects: H Social Sciences > HF Commerce
H Social Sciences > HF Commerce > HF5601 Accounting
Divisions: Fakultas Ekonomi dan Bisnis (FEB) > Prodi Akuntansi
Depositing User: Susi Sarumpaet
Date Deposited: 18 Oct 2019 03:14
Last Modified: 18 Oct 2019 03:14
URI: http://repository.lppm.unila.ac.id/id/eprint/14532

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