Factors Influence Underpriced Level and the Aftermarket Stock Price Behavior in Jakarta Stock Exchange in Year 1999-2003

Abstract

Sarsmistha, Dian (2005). Factors Influence Underpriced level and the Aftermarket Stock Price Behavior in Jakarta Stock Exchange in year 1999-2003. Yogyakarta. Faculty of Economics. Islamic University of Indonesia. This research is aimed to show how the factors influence the underpriced level and aftermarket price behavior of the initial stock. The factors are underwriter reputation, firm age, firm size, Price Earning Ratio (PER), Earning Per Share (EPS) of the Indonesian firms that conducted the Initial Public Offering in Jakarta Stock Exchange for the period of 1999-2003. This research will reflect the company's performance as a result to decide the investment choice by the investor. This research applies linear regression model of the underwriter reputation, firm age, firm size, PER, EPS as the independent variables and underpriced as the dependent variable. The result of this research shows that those five variables do not have significant influence to the underpriced level in year 1999-2003. It seems that the investors do not consider about the fundamental aspects of the firms when they decide to invest their money. Meanwhile, the aftermarket stock price behavior is conducted with the correlation between day and market-adjusted return. This research finds that there is no significant alteration to the stock price in 30 days after the Initial Public Offering. The underwriter and the issuer keep the price in stable condition in 30 days following the initial offerings. Moreover, The investors still get the positive and negative market adjusted return in first day aftermarket, which means that the stock price aftermarket has not reflected the semi strong efficient market.