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Jurnal Ekonomi Malaysia

55 (1) 2021 71 – 85

Stock Price Reaction when Covid -19 Exist: Moderating by Firm’s Operating Cash Flow
Reaksi Harga Saham Ketika Kewujudan Covid-19: Penyederhanaan Operasi Aliran Tunai oleh Firma

Accounting Science Postgraduate
Universitas Indonesia
FEB UI Postgraduate Building
2nd Floor UI Depok Campus 6424
INDONESIA

santyonug@gmail.com

Accounting Postgraduate
Universitas Gadjah Mada
Bulaksumur Yogyakarta 55281
INDONESIA

intanmeilani05@gmail.com

Abstract

COVID-19 has been declared a global pandemic by the WHO, rendering the stock markets volatile. Investors predict that the pandemic can be a threat to a company’s cash flow, whereas managers use the last year’s financial condition to defend their stock price. We evaluate whether the company’s operating cash flow moderates the company’s financial condition and stock price reactions, in addition to making a comparison between the period before and during the COVID-19 pandemic using Difference in Difference. The regression analysis model used is a random effect model. The objects of this research are the hotel, tourism, restaurant, and retail trade sub-sector companies in the first quarter and second quarter of 2020, and 2019 and 2018 annually. We found that none of the firm’s financial condition affected the stock’s price reaction. We also found that operating cash flow strengthens the relationship between cash and ROA to the stock price. The results of this study further imply that the COVID-19 pandemic caused a significant stock price reaction when compared between the time before and during the COVID-19 disaster in Indonesia. The current study is hoped to contribute towards supporting the government in formulating policies to stimulate the currently-slumping economy. This study can also assist the investors in preparing their analysis to determine whether what action they should take in regards to their stocks, considering that our research implicitly reflects the development of conditions in several industrial sectors.

Keywords

Covid-19; financial condition; operating cash flow; stock price

JEL Codes

G01, G30, G31

Author’s Acknowledgement

We would like to thank Ms. Yulianti, Ph.D., who contribute to share, discuss, and give solutions to our work.

http://dx.doi.org/10.17576/JEM-2021-5501-5
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Bibliography

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Nugroho, , & Pertiwi, (2021). Stock Price Reaction when Covid -19 Exist: Moderating by Firm’s Operating Cash Flow. Jurnal Ekonomi Malaysia, 55(1), 71–85. http://dx.doi.org/10.17576/JEM-2021-5501-5

@article{nugroho2021stock,
  title={Stock Price Reaction when Covid -19 Exist: Moderating by Firm’s Operating Cash Flow},
  author={Nugroho, Dwiyanjana Santyo and Pertiwi, Meilani Intan},
  journal={Jurnal Ekonomi Malaysia},
  volume={55},
  number={1},
  pages={71—85},
 

year={2021},
}

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