Market Reaction of Telecommunication Companies Before and After the Passing of the Omnibus Law on Job Creation

Abstract

This study analyzes and examines the reaction of the Indonesian capital market to the pasing of Omnibus Law on Job on October 5, 2020. The study uses an event study approach focusing on abnormal returns and trading volume activity (TVA). The study utilizes secondary data from 13 telecommunications companies listed on the Indonesia Stock Exchange (IDX). The data was obtained from financial reports on the official IDX website and from other relevant sources for research purposes. The observation period was conducted for 10 days before and 10 days after the event. Hypothesis testing was done using one-sample t-test and paired sample t-test, accompanied by normality tests for the data. The results show a significant reaction in abnormal returns, but not in TVA. The Indonesian capital market is relatively inefficient in processing information related to the passing of the Omnibus Law because the market took a longer time to reflect the information in trading volume activity. The research findings support signaling theory, suggesting that public information affects investor perception. This study provides important insights into market reactions to major events, especially in the political domain, and supports future research on event studies.

Keywords: Job Creation, event study, abnormal return, trading volume activity, market efficiency