“Is cash flow growth helping stock performance during the COVID-19 outbreak? Evidence from Indonesia”

The COVID-19 pandemic is an unexpected event that causes stock market investors to panic so that their value drops drastically. Operating cash flow and free cash flow are indicators of a company’s financial statements that are used as a reference for in- vestors’ decision making in the stock market. A firm’s cash flows reflect real changes in the firm’s value for money. Cash flow growth can provide information on how well the firm’s performance is in generating incremental cash inflows that can increase firm value. This study aims to explore the relationship between cash flow growth before the COVID-19 pandemic and after the COVID-19 outbreak on stock price performance. This study uses the OLS regression method with a total sample of 426 companies in the Indonesian capital market in the period March 2, 2020 to March 2, 2021. The results show that cash flow growth from operations and free cash flow growth had no sig- nificant effect on stock return after COVID-19 outbreaks in years 2020 to 2021. Sales growth, market capitalization and stock return before the COVID-19 outbreak from 2019 to 2020 had a significant negative correlation with the post COVID-19 outbreak stock return. Then, sectors whose stock performance is positively correlated after the COVID-19 outbreak are basic industry, chemicals, miscellaneous industry and infrastructure. This shows that the economic crisis caused by COVID-19 is an anomaly in the stock market. Therefore, cash flow is not relevant information for investors in predicting a company’s performance during the COVID-19 pandemic crisis.


INTRODUCTION
The phenomenon of the COVID-19 outbreak in early 2020 caused an economic crisis in different countries. The economic crisis is very detrimental because it causes an increase in volatility in the capital market, which leads to a sharp decline in capital market performance. The case of the COVID-19 outbreak in 2020 causes contractions between sectors both in the long and short term and a decrease in economic output and reduced employment. This has a negative impact on a country's economic stability and has a negative impact on the 9 NYSE sectors in the US. The case of the COVID-19 outbreak in 2020 caused a global economic downturn and the worst stock market crash in the 21st century Altig et al., 2020).
After the crisis, the capital market took a long and complex process to recover. Investors must be careful in making decisions. Because the ability of investors to analyze and select information will be the basis for investors in making decisions, which will then be reflected in the returns they receive (Harvey et al., 2016). The financial crisis affects companies' profit. A company's profit is widely used as a measure for the intrinsic value of the company. However, profit is only an account-ing measure that does not fully reflect the additional value for shareholders and is vulnerable to manipulation by managers, which makes the profitability measure polluted and does not reflect the actual economic situation (Novy-Marx, 2013). Therefore, it is necessary to analyze the cash flow statement to be able to find out the nominal cash inflow that is actually received along with the increase in accruals. Well-known bankruptcy cases such as the Enron and WorldCom cases show that the presentation of a profitable income statement can go hand in hand with a negative operating or free cash flow report (Foerster et al., 2017).
A firm's cash flow (CF) reflects more on the long-term stock price. When compared to nominal cash flow, cash flow growth is more appropriate to compare with returns because CF growth provides information about the firm's ability to generate incremental cash inflows. High operating cash flow and free cash flow indicate a firm has good performance (Jansen, 2021).
A company's cash flow (CF) is more reflective of the long-term stock price. When compared to nominal cash flows, cash flow growth is more accurate than returns because CF growth provides information about a company's ability to generate additional cash inflows. High operating cash flow and free cash flow indicate the company has a good performance (Jansen, 2021). However, what is the impact of CF during the economic crisis? Research related to CF during the economic crisis due to the COVID-19 pandemic has not been widely explored. This study seeks to fill the research gap. During the financial crisis due to the COVID-19 pandemic, did cash flow growth 5 years before COVID-19 help stock performance during the COVID-19 pandemic? Companies that had persistent cash flow growth in previous years are expected to show faster stock price performance after the first cases of the COVID-19 crisis were announced. This study contributes to exploring the phenomenon of company stock performance during the COVID-19 pandemic.

Financial crisis and COVID-19
The financial system of a country is an integrated part of the interconnected world economic system. The capital market is part of a system that interacts in making decisions on supply and demand for capital needs. The gap between supply and demand can cause fluctuations in the value of the capital market that deviates from the actual value. Under certain extreme conditions, for example, a period of economic crisis, it can cause a shock in the capital market. This can make the capital market inefficient. The economic crisis has raised concerns among investors that led to the collapse of the capital market (Bartram & Bodnar, 2009;Tran, 2018).
The financial crisis is an unavoidable part of the business and economic cycle, where each crisis characteristic is different, depending on the cause of the occurrence. The impact of the financial cri-sis can be divided into four categories of influence, namely, companies, share volume and price, investor behavior, and market regulation (Mitchell, 1941;Schwert, 1989). The crisis caused economic conditions to show a reversal trend. The crisis itself is defined as a deviation from economic activity and is the starting point of a "round down" or "round up" (Jansen & Stockman, 2004;Kaserer & Rosch, 2013). The financial crisis caused a stock market crash that was followed by a massive decline in the exchange rate as investors panicked. Crisis management is very important to do and must be handled properly because if it is not handled properly, then this can cause the value of a company to be destroyed (Fink, 1993;Lauterbach & Zion, 1993;Lim et al., 2007).
One effective way to reduce financial chaos is to provide facilities to increase equity capital in order to be able to maintain cash flow. In this case, a cut in dividends needs to be made to reduce the negative impact of this, which is actually not liked by shareholders. This was done to maintain a company's liquidity because after the financial crisis, many financial institutions were neither able nor willing to take risks, which caused them to shrink loans to companies. This causes many companies that have financial difficulties to find it increasingly difficult to obtain funding to support their operations due to the increasing cost of borrowing (Campello et al., 2010).
The economic crisis can also cause panic among investors. This phenomenon is in line with the psychology of survival. Individuals can experience behavioral changes due to certain extreme events such as natural disasters or economic crises. Panic will worsen the economy causing investors to behave irrationally and tend to overreact (Easley & Kleinberg, 2010;Forbes, 2017). Herd mentality and panic selling/buying without rational investment decisions. This is influenced by the information cascade effect when investors make decisions influenced by the immediate environment. For example, "scarcity heuristics" can affect investor panic during an economic crisis so that investment decisions are taken irrationally (Cheung et al., 2015).
The COVID-19 pandemic resulted in a financial crisis and caused an economic slowdown that resulted in unprecedented global economic damage. The COVID-19 pandemic caused a significant temporary decrease in the top line and had an impact on the availability of a company's cash flow, which created uncertainty on the company's performance going forward. In this way, investors lose confidence in companies in the capital market (Goodell, 2020;Fahlenbrach et al., 2020;Narjoko et al., 2020).
The global financial crisis in 2008 had an impact on the determinants of a company's cash holdings, adjustments to the target cash level and cash flow (Song & Lee, 2012). The determinants of a firm's cash holdings differ significantly for the pre-crisis and post-crisis periods. The optimal speed of cash level adjustment is much lower in the post-crisis period so that the global financial crisis significantly resulted in limited liquidity and financial flexibility (Batuman et al., 2021). Did the cash flow phenomenon during the 2008 economic crisis due to banking failures also occur during the COVID-19 crisis? This is an interesting research gap because the causes of the economic crisis are different.

Agency theory and free cash flow
Agency theory proves that sales growth does not always increase shareholder returns. A company's sales growth prioritizes managers' wealth, has a strong correlation with executive compensation. Managers prioritize the profits they receive compared to the profits that shareholders receive (Murphy, 1985;Jensen, 1986). The Free Cash Flow Hypothesis (Jensen, 1986) states that without effective control managers have the potential to invest in projects that maximize their own interests at the expense of shareholders. They take projects that are not profitable as long as the project provides benefits to them, which incurs agency costs. The personal profit earned by a manager is proportional to the investment expenditure made by a company (Grossman & Hart, 1988).
The cash flow statement when compared to profit is a more direct measurement tool when compared to profit in that it makes the cash flow report more relevant in decision making (Bernstein, 1993). Capital markets have an excessive fixation on earnings and fail to digest the information reflected in the cash flow component because investors tend to over-react to the accrual income component, even though their influence is actually lower than actual earnings. The fixation on profits and profits has been used widely and for a long time by the investor community (Sloan, 1996;Block, 1999

Operating cash flow and free cash flow growth
Operating cash flow is said to have a much stronger influence than cash flow from investing and financing activities because the information provided by operating cash flow helps investors to understand more deeply about the main sources and uses of company funds (Verrecchia & Weber, 2006). Separate operating cash flow reports can make investors understand whether sales received by a company are paid directly or received with receivables (Foerster et al., 2017).
Free cash flow plays an important role for a company. The greater the free cash flow, the healthier the company is as it has more funds to encourage company growth (Jensen, 1986). Free cash flow also reflects the flexibility of a company in paying debts, increasing investment and increasing liquidity. Therefore, it can be concluded that the higher the size of the free cash flow of a company, the better the company's performance. Free cash flow is cash owned by the company after all operational needs are met by the company and payments for net fixed assets and net current assets have been met. However, Vogt and Vu (2000) found empirical evidence that not all investment activities reflected in a company's capital expenditure have a positive impact. Companies with high free cash flow but with a history of high capital expenditure are associated with low excess returns. This happens because managerial decisions in capital spending decisions do not necessarily refer to profitable investments. Thus, excessive free cash flow that cannot be managed properly by a company will actually lead to agency problems, which actually reduce the return of stock returns for shareholders (Jensen, 1986).

Cash flow growth and stock performance during the COVID-19 pandemic
The COVID-19 crisis caused a significant decrease in the top line and had an impact on the availability of a company's cash flow. One way to reduce financial chaos is when companies are able to maintain cash flow, because in a financial crisis, financial institutions tend to withhold lending to companies so that the cost of borrowing increases. Financial chaos can be overcome by maintaining cash flow because cash flow stands as an effective tool for companies, especially during crisis periods (Arslan et al., 2006). So, companies have cash flows that should be valued higher by investors in normal economic conditions.
Compared to investment and funding cash flows, operating cash flows have a stronger influence on stock returns because they contain information related to stock returns. Operating cash flow is cash inflow that comes from the main business activities of a company that has deducted the cash used to generate the cash inflow or called cash outflow. Disclosure of operating cash flow has proven useful for predicting future company performance because operating cash flow helps investors to understand more deeply about the main sources and uses of company funds. However, it is not enough based on one period, because it could be a one-time event. Therefore, it is necessary to look at operating cash flow growth (Verrecchia & Weber, 2006).
This study examined the relationship between operating cash flow (OCF) growth and post COVID-19 outbreak stock performance. If the OCF growth is high, then, of course, it means that a company's superior performance tends to be sustainable. The growth of operating cash flow has material information that affects stock returns because the growing operating cash flow reflects a company's ability to earn profit (Jansen, 2021). Therefore, companies with consistent OCF growth will recover faster in times of economic crisis. This faster recovery is measured by higher stock returns. So, companies that recovered more quickly during the COVID-19 period are rare companies, so it deserves to have a higher market value valuation.
Companies with high OCF growth will correlate with higher stock returns during the crisis and in the future.
Compared to operating cash flow (OCF), free cash flow has more information that reflects a firm's value. Free cash flow (FCF) itself is an operating cash flow that excludes capital expenditure. By excluding capital expenditure, free cash flow separates the operational and investment components. Free cash flow tries to describe the net cash that can be allocated for future growth opportunities. Companies that have excess cash for shareholders have performance above the average performance of other companies (abnormal returns). The increased free cash flow reflects continuous growth momentum (Vogt & Vu, 2000).
Growth momentum is based on the expectation for a company to expand. Therefore, companies with free cash flows and favorable investment opportunities are considered to have future growth opportunities (Vogt, 1997). However, when faced with a crisis, companies tend to reduce investment activity (Song & Lee, 2012). The decrease in capital expenditure, and the stagnant/increasing operating cash flow value, made the available free cash flow also increase to pay more attention to liquidity. Free cash flow can indeed maintain a company's position, but free cash flow growth can make an increase in stock prices.
Investors can generate large returns by focusing on investing in companies that have growing cash flows. Companies that have persistent free cash flow growth are companies that have effective capital expenditure decisions (Jansen, 2021).
With the increasing availability of free cash flows, companies can use it for any purpose so that when facing a financial crisis, it can be used to normalize their activities. These companies tend to show stable performance and are more immune to the negative impacts of the economic crisis. Companies like this should be rated higher by investors because they can maintain the stability of a company's performance. Therefore, this study proposes the hypothesis that the existence of free cash flow growth has a positive effect on post COVID-19 outbreak stock performance. Companies with consistent FCF growth will recover faster in times of crisis.
Cash flow can be an effective tool for companies during crisis periods, and growth is an indicator that shows a company's parameters in maintaining the company's position in economic con- To test the hypotheses of this study, which aims to analyze the relationship between Operating Cash Flow Growth and Free Cash Flow Growth with post-COVID-19 outbreak stock performance, this study proposes a research framework as shown in Figure 1.

Population and sample
The population used in this study are companies in the Indonesian capital market that have published financial statements since 2015 and have complete data. The sampling method chosen is purposive sampling where the sampling has been determined at the beginning so that it can obtain data that is in accordance with the research objectives (Etikan, 2016). The sample data used in the study are 426 companies that have been listed since 2015, excluding the financial sector, 24 companies have been delisted, and 28 companies have been suspended from the stock exchange. All quantitative data is taken based on data from the Bloomberg terminal.

Variable operations
The dependent variable in this study is stock returns after COVID-19, namely stock returns for the first quarter of 2020 to the first quarter of 2021. The independent variables are cash flow    Table 2 shows the operation of the variables from the study.

Descriptive statistics
This study uses 426 samples. Table 3

Regression results
When testing the hypotheses, the research model used has been tested to meet the multicollinearity and linearity tests, but does not meet the normality requirements due to the large outlier value. Based on the results of the research model regression in Table 4, it can be seen that through testing the coefficient of determination reflected by the R-Square value which is 0.1132 (11.32%). This result shows that 11.32% of the variation in the dependent variable is stock returns for the period   Note: Level of significance at *** 1%, ** 5%, * 10%.  Table 5 shows the results of regression model 2, the estimated independent variables, namely, OCFgrowth 2015-2019 and FCFgrowth 2015-2019 partially have no significant effect on stock returns for the period March 2, 2020 -March 2, 2021 with significance levels of 0.617591 and 0.654678, respectively. Similarly, the independent control variables, DER, AssetGrowth, and SalesGrowth, did not have a significant effect on the dependent variable. Meanwhile, the independent control variable R1YBefore has a significant effect with an alpha level of 5%, and MarketCap has a significant effect with an alpha level of 10%. For sectoral dummy variables, the variables DAgri, DProperty, DConsumer, DMiscInd have no significant effect, but the db variable has a significant effect with an alpha level of 5%, and DMining, DInfra has a significant influence with an alpha level of 10%. The significance value of OCFgrowth and FCFgrowth on the 1 Year COVID-19 Stock return in the study was below the 5% and 10% alpha significance levels. Through the results of the significance test (F test) it can be seen that the p-value is 0.000, which is smaller than the significance of 0.05. So it can be concluded that in this study, the independent variables in the model affect the dependent variable together.
The results of this study indicate that there is a negative and significant relationship between market capitalization in 2019 and 1 year after COVID-19 returns or the period 2020-2021. These results show that the market share value reduces shareholder value in that period. This negative relationship can be caused by mispricing caused by overreaction from investors. These results are in line with the results of the study by Cooper et al. (2008) and Skinner and Sloan (2002) related to behavioral finance, which stated that stock prices experienced drastic changes due to excessive investor reactions. In this case, investors may overreact to the COVID-19 pandemic.
During the period of economic crisis, investors were surprised by the deteriorating operating performance. They realized that their expectations about these companies were not being met, leading to lower stock market returns. There is a negative and significant relationship between Sales Growth 2015-2019 and 1-year returns after the COVID-19 outbreak, which shows that sales growth actually reduces shareholder value. Companies that reported high operating performance and increased sales in the previous year were highly rated by investors, where investors had expectations that the company would generate higher sales in the following year. Investors overreacted to bad news about these companies because their initial expectations were not met.
The results of this study also found a negative and significant relationship between stock returns before (March 1, 2019-2020) and after the COVID-19 outbreak (March 2, 2020-2021). This finding is interesting because in general a company's stock price in the previous year will not differ much from the stock price of the previous year, the following year's share price, except for companies that face negative or positive events that have a very significant impact on the value of a company. Table 6 shows a comparison of the mean, max, min, stdev returns before (March 1, 2019-2020) and after COVID-19 (March 2, 2020-2021), it was found that the post COVID-19 outbreaks mean or average returns were higher than pre COVID-19 stock returns. The data shows that on average all industries are improving, but if a test is carried out based on the regression method, only three sectors are significant, namely, DBasicInd, DMining, and Infra. This indicates a company that has a very high return value in the sector. Through the Two sample test, each sector has a p-value below 5% alpha and 10% alpha. If the p-value is below alpha, it can be concluded that there is a significant difference between sectoral returns before and after COVID-19. Continue to boost infrastructure in the midst of the pandemic, which is more directed at providing basic services, increasing connectivity, supporting economic recovery, and food security. Development is also directed in the form of labor-intensive infrastructure that supports industrial and tourism areas.

DISCUSSION
The results showed a positive but not  (Chang et al., 2007).
The panic over the COVID-19 outbreak can cause investors to become irrational in making decisions. This is in accordance with the psychology of survival, which argues that individuals can experience behavioral changes due to certain events, including natural disasters, terrorist attacks and the occurrence of crises (Forbes, 2017). This change in behavior can be caused by fear of the COVID-19 pandemic, resulting in herd mentality, panic buying and a 180-degree change in habits from usual in making investment decisions. There is an information cascade effect where investors usually make decisions that are influenced by the surrounding environment or based on something they are familiar with. Furthermore, "scarcity heuristics" have a significant role in investors' fear/panic during periods of shock or crisis, thus making them act irrationally or not see cash flow as an indicator of company performance (Easley & Kleinberg, 2010;Cheung et al., 2015). Psychological factors of investors, such as herding behavior, anchoring and over/under reacting, create problems that make the price in the capital market not reflect the actual situation accompanied by increased volatility, which causes pricing This study also has limitations because it uses a fairly short period of time after the COVID-19 crisis, only 1 year due to data and time limitations. So if the COVID-19 pandemic crisis continues and investors become accustomed to COVID-19, it is necessary to add a longer period of time.
Research using multi-periods, namely weekly, monthly, or quarterly for the dependent variable, will also be able to sharpen research results during the COVID-19 pandemic. Then, similar research needs to be carried out with a wider area coverage in developing and developed countries in accordance with the increasing number of COVID-19 cases that occur.

CONCLUSION
This study aims to analyze the effect of annual Operating Cash Flow (OCF) growth and Free Cash Flow (FCF) growth on stock returns for the 2020-2021 period after the COVID-19 outbreak in March 2020. The results show that the annualized OCF growth and annualized FCF variables growth has no significant effect on stock returns after the COVID-19 outbreak in 2020. This is because the COVID-19 crisis has an impact on the economic system, especially the volatility of stock price movements in the capital market. The anomaly of stock price movements supports the irrational behavior of investors in a state of shock that causes panic and concern. This greatly affects investors' investment decision making so that investors overreacted to stock prices during the COVID-19 pandemic crisis. During the economic crisis due to the COVID-19 pandemic, investors find it difficult to choose relevant information for rational investment decision making. Financial behavioral factors such as overreaction, herding, and anchoring make prices in the capital market not reflect the true value of a company. This financial behavior increases stock price volatility.
The results also show that there is a significant negative relationship between 2015-2019 Sales Growth, 2019 Market Capitalization and stock returns after the COVID-19 outbreak. Then, the stock performance of the basic industry, chemical, various industries and IT infrastructure sectors was positively correlated after stock returns from the COVID-19 outbreak. The negative and significant influence can be caused by excessive investor reactions. Investors' initial expectations before COVID-19 were for companies with large market capitalization and high sales increases. However, the COVID-19 pandemic caused economic conditions to worsen and reduced a company's operating income. This causes a company's performance to fall short of the initial expectations of investors, so investors overreact to the situation. When they realize that their expectations of these companies are at risk of being unfulfilled or leading to lower stock returns, investors panic. This situation makes investors to overreact during the financial crisis due to the 2020 COVID-19 pandemic.