The Effect of The Company's Income Information Publishing and Income Expectation to Stock Price

Abstract

Many people start to think one of the ways to increase their income is with put aside some money to be invested. An investor buying the company's stock in order to expect for the return called capital gains. In doing the investment, it is important to the investor knowing the stock price. But it not easily can predict. The investor has to know the indicator influence the stock price. One of the indicators is the company income, which is representing the company success. Company income information has very important role. Many investors it as the consideration in making decision to invest their money in the capital market and of course will be influence to the demand and supply which suddenly can change the stock price. This thesis aims to analyze the company's income information as the stock price indicator, whether the publication ofcompany's incomecan cause the stock price around the publication date, and also identify whether the investor get the abnormal return from it. This is also known as the event study. In this research, the companies will be analyzed in two groups; companies that can fulfill the investor's expectation and companies that can not fulfill the investor's expectation. The companies can fulfill the investor's income expectation if the actual income (publicate net income) is bigger than the investor's income expectation. Investor's income expectation or the income expectation is calculated using trend analysis. Trend analysis is use because the independent variable is time so the result of the income expectation can be known before the actual income. The result of this research shows that the companies that can fulfill the income expectation are follow by a significant positive market reaction. It can be seen by the increasing abnormal return and the probability (sig-t is lower than 0,005) on several days after the announcement period. On the other hand, the companies that cannot fulfill the expected income is also following by a negative market reaction. It can be seen from the decreasing abnormal return before and after the publication date.