UNDERPRICING in INITIAL PUBLIC OFFERING; EMPHIRICAL STUDY of JSX CASE (2004-2006) FINAL PROJECT
By Dimas Werhaspati 19004039
Undergraduate Program School of Business and Management Institut Teknologi Bandung
VALIDATION PAGE
UNDERPRICING in INITIAL PUBLIC OFFERING; EMPHIRICAL STUDY of JSX CASE (2004-2006)
By: DIMAS WERHASPATI ID No: 19004039
Undergraduate Program School of Business and Management Institut Teknologi Bandung
Validated By
Deddy P. Koesrindartoto Ph.D NIP: 999 059 102
ABSTRACT UNDERPRICING in INITIAL PUBLIC OFFERING; EMPHIRICAL STUDY of JSX CASE (2004-2006) Dimas Werhaspati 19004039 Final Test Date: 9th August 2007 Graduation Date: 27th October 2007 Undergraduate Program, ITB 2007 Counselor: Deddy P. Koesrindartoto Ph.D Profit seeking companies meaning that the company’s goal is to maximize share holder’s value and company’s profit. In order to do so, one of the ways to finance the company’s business activities is by doing Initial Public Offering (IPO) meaning that the company lists their share through capital market. Parties involved in IPO are the company itself, investor, underwriter and the market regulator. The settlement price of shares listed in IPO is very important to the company because it determines whether the IPO will success or fail, and each party’s interest would affect the settlement price process. The purposes of doing IPO are to gain additional capital from public or external investor, and to expand the company’s business capacity. It provides accsess to public equity capital so may lower the cost of funding the company’s operations activities, but at the same time the company acquires new obligations in the form of transparency and disclosure requirements. IPO has interested many financial economists both local and international for many decades and a large body of empirical studies has confirmed the finding that IPO tends to be under-priced and it is costly for the firm’s owner. Underpricing in IPO meaning that the IPO price set in the primary market is lower than the price set in the secondary market for the same particular stock. There were 31 companies that executed IPO in Indonesia in the 2004-2006 periods to be analyzed in this research. The objectives of this research are to find the evidence of IPO underpricing tendencies, or any other tendencies (par-pricing or overpricing) in the short-run observation (up to 3 months) by using abnormal return on stocks approach and analyze the findings with capital market theories. The results from one sample ttest hypothesis testing is that the undepricing tendencies did occur in Indonesia IPOs in the 2004-2006 period for the first day trading, first week up to the fourth week, but did not occur in the third month trading (par-pricing, meaning that the IPO price did set at the right price). The return and the risk of holding particular within the observation period are also explained, so may this research could be used as guidelines in protecting each party’s interests that involved in IPO process. Due to several limitations in doing this research, the recommendation for the next researches is to do further studies in order to obtain more depth understanding, explanations based on the underlying theories and more precise results. Keywords; IPO, underpricing, par-pricing, overpricing.
ABSTRACT HARGA SAHAM PERDANA di BAWAH HARGA PASAR; STUDI KASUS BURSA EFEK JAKARTA 2004 - 2006 Dimas Werhaspati 19004039 Tanggal Sidang: 9th August 2007 Tanggal Wisuda: 27th October 2007 Undergraduate Program, ITB 2007 Pembimbing: Deddy P. Koesrindartoto Ph.D
Perusahaan yang berbasis bisnis adalah perusahaan yang bertujuan untuk memaksimalisasi nilai dari pemilik perusahaan dan mencari keuntungan yang sebesar-besarnya. Untuk mencapai tujuan tersebut, salah satu cara yang bisa ditempuh perusahaan untuk membiayai proyek-proyeknya adalah dengan melakukan Initial Public Offering (IPO) yaitu dengan menjual sahamnya atau kepemilikannya di pasar modal. Dalam kegiatan ini pihak-pihak yang terlibat adalah perusahaan itu sendiri, investor atau penanam modal, underwriter, dan regulator pasar modal. Harga penentuan pada saat IPO oleh pihak-pihak tersebut menjadi sangat penting karena akan menentukan apakah IPO tersebut bisa dikatakan berhasil atau tidak, dan yang tentunya akan mempengaruhi kepentingankepentingan pihak-pihak terkait. Tujuan perusahaan melakukan IPO adalah untuk memperoleh tambahan modal dari publik dan investor luar, dan juga untuk bisa memperluas kapasitas bisnisnya. Dengan IPO, perusahaan akan memperoleh akses ke modal dari masyarakat luas yang bisa menurunkan biaya pendanaan dan investasi, tetapi sekaligus memperoleh kewajiban-kewajiban selayaknya sebagai perusahaan terbuka. Topik IPO sudah lama menarik perhatian dari para peneliti di bidang ekonomi dan keuangan, dan banyak hasil penelitian yang menyatakan bahwa harga IPO cenderung di bawah harga yang seharusnya atau harga pasaran yang merugikan bagu pihak perusahaan tersebut. Hal itu berarti bahwa harga saham pada saat IPO di pasar perdana lebih rendah dari pada harga saham untuk perusahaan yang sama yang dijual pada pasar kedua (bursa umum). Di Indonesia terdapat 31 perusahaan yang melakukan IPO dari tahun 2004 sampai dengan tahun 2006, yang kemudian akan dijadikan bahan analisa di penelitian ini. Tujuan utama penelitian ini adalah untuk menemukan bukti adanya kecenderungan harga IPO berada di bawah harga pasar dalam pengamatan jangka pendek atau bahkan harganya di atas harga pasar atau sesuai dengan harga pasar (sampai dengan 3 bulan). Pendekatan yang dilakukan di penelitian ini adalah Abnormal Return pada saham-saham terkait dan hasilnya akan dikaitkan dengan teori-teori pasar modal yang ada. Ternyata hasil dari tes hipotesa yang dilakukan (one sample t-test) fenomena harga IPO berada di bawah harga pasar memang terjadi, untuk lebih spesifik hal itu terjadi pada pengamatan di hari pertama penawaran, minggu pertama sampai dengan minggu ke-empat, tetapi tidak terjadi pada saat pengamatan di bulan ke-3 (harga IPO tidak berada di bawah atau di atas harga pasar). Nilai pengembalian dan resiko dari saham-saham IPO juga akan dijelaskan di penelitian ini, sehingga hasilnya bisa digunakan sebagai gambaran dan juga strategi bagu pihak-pihak terkait. Mengingat banyak keterbatasan dalam penelitian ini, disarankan bagi peneliti selanjutnya agar bisa melihat fenomena ini dengan sudut pandang yang lebih dalam dan pembelajaran yang lebih jauh agar hasilnya lebih optimal dan bisa mengaiktkan fenomena yang terjadi dengan landasar teori yang lebih tepat. Kata kunci: IPO, harga IPO di bawah / di atas / sesuai dengan harga pasar.
FOREWORD The research of “Underpricing in Initial Public Offering (IPO); Empirical Study of JSX Case (2004-2006) is a study to identify and explain tendencies of IPO in Indonesia. This research is part of the writer final project due to the compulsion of the final year at SBM-ITB 2007 enrollment. The topic chosen is due to some consideration. First, this topic is very challenging that needed to be explored further in order to get the overall description of IPO in Indonesia Second, this particular research never been done before by another analysts within the same approach and time period of observation. And third, this research could be used as an investment strategy for capital market player, especially for those who interested in IPOs investment. The writer is aware that this research still has many limitations and weaknesses, so may it needs further improvements and deeper observations. The writer wants to thank all parties that help the writer to accomplish this research. Many thanks to:
• God Almighty for the unlimited resources • The writer parents for all the support and understanding • The writer’s counselor Mr. Deddy P. Koesrindartoto Ph.D for all his directions and explanations
• Bursa Efek Jakarta for all the data needed for this research • Mr. Adi Widjonarko for all the suggestions due to the topic • The writer’s colleague for all the discussion and appreciation • And other indirect parties who involve and support in accomplishing this research Bandung, 26 July 2007
LIST OF CONTENTS ABSTRACT………......................................................................................
i
FOREWORD……………………………………………………………….
iii
LIST OF CONTENTS……………………………………………………...
v
LIST OF TABLES…………………………………………………………
vii
LIST OF EQUATIONS……………………………………………………
ix
LIST OF APPENDIXES…………………………………………………..
xi
CHAPTER I INTRODUSTION…………………………………………...
1
1.1 Background…………………………………………………………..
1
1.2 Problems Identifications, Limitations and Formulations…………….
3
1.2.1 Problems Identifications……………………………………….
3
1.2.2 Problems Limitations…………………………………………..
4
1.2.3 Problems Formulations………………………………………...
4
1.3 Research Importance…………………………………………………
5
1.4 Research Implications………………………………………………..
5
CHAPTER II THEORITICAL FOUNDATIONS…………………………
7
2.1 Benefits and Consequences of IPO…………………………………..
7
2.2 IPO (Go Public) Procedures…………………………………………
8
2.3 Reasons for Underpricing……………………………………………
9
2.3.1 Assymetric Information Models……………………………….
9
2.3.2 Institutional Explanations……………………………………...
10
2.3.3 Ownership and Control………………………………………...
11
2.3.4 Behavioral Explanations……………………………………….
11
2.3.5 Changing Risk Composition Hypothesis………………………
13
2.3.6 Abnormal Return on Stocks……………………………………
13
2.3.7 t-Test Hypothesis Testing………………………………………
13
CHAPTER III METHODOLOGY………………………………………...
15
3.1 Diagram Flow………………………………………………………..
15
3.2 Problems Definitions...........................................................................
16
3.3 Study Literature……………………………………………………...
16
3.4 Data Collection………………………………………………………
17
3.5 Data Analysis………………………………………………………...
17
3.6 Conclusions…………………………………………………………..
19
CHAPTER IV DATA COLLECTION and ANALYSIS………………….
21
4.1 Data Collection………………………………………………………
21
4.2 Data Analysis………………………………………………………..
23
4.2.1 Abnormal Return Calculations…………………………….......
23
4.2.2 Hypothesis Testing…………………………………………….
24
4.2.3 Hypothesis Testing Analysis………………………………….
26
CHAPTER V CONCLUSIONS and RECOMMENDATIONS…………..
29
5.1 Conclusions………………………………………………………….
29
5.2 Recommendations…………………………………………………… 30 REFERENCES…………………………………………………………….. 33
LIST OF TABLES 4.1 Stock Price Movement (P(t)) from the IPOs up to the Time Period of Observation in the Year 2004-2006…………………………………..
18
4.2 Index Price Movement (I(t)) from the IPOs up to the Time Period of Observation in the Year 2004-2006…………………………………..
19
4.3 Abnormal Return (P(a)) of IPOs stocks in the Time Period of Observations in the Year 2004-2006…………………………………
21
4.4 Descriptive One-Sample Statistics Mean Difference from the IPOs up to the Time Period of Observation……………………………………
23
4.5 Descriptive One-Sample Test t-value and Significance Hypothesis Testing………………………………………………………………… 23 5.1 Hypothesis Testing Result Summaries………………………………..
26
LIST OF EQUATIONS 3.1 The Stock Price Movement of Particular Period……..
18
3.2 The Index Price Movement of Particular Period……..
18
3.3 The Abnormal Return in Stocks……………………...
19
LIST OF APPENDIXES A
STOCK PRICE CALCULATIONS
B
INDEX and ABNORMAL RETURN CALCULATIONS
C
t-VALUE CALCULATIONS
