A. Razak

This study examined the response of stock prices on the Indonesia Stock Exchange (IDX) to COVID-19 using an event study approach and the GARCH model. The research sample is the closing price of the Composite Stock Price Index (JCI) and companies that are members of LQ-45 in the 40-day period before the COVID-19 incident, 1 day during the COVID-19 incident (March 2, 2020) and 10 days after, January 6, 2020 – March 16, 2020. Empirical findings prove that abnormal returns react negatively to COVID-19, JCI volatility fluctuates widely during the COVID-19 event, and the GARCH(1,2) model can be used to assess volatility and predict stock abnormal returns in IDX in market conditions infected with COVID-19. The practical implication of the study’s findings for investors is that the COVID-19 event caused stock price volatility, which affects abnormal returns. Therefore, to face the conditions of uncertainty and increased volatility in the future, several lines of risk management are needed in managing a stock portfolio. In addition, it also opens up opportunities for speculators to profit in an inefficient market environment. This study is based on the empirical literature currently being developed to investigate the phenomenon of stock price volatility behavior during COVID-19 on the IDX. The GARCH model used proves that during the COVID-19 pandemic, stock price volatility increases and leads to a decrease in abnormal returns. The empirical findings also validate the efficient market hypothesis theory related to the study of events and the theory of financial behavior related to uncertainty.

Type of the article: Research Article

Abstract
Investors are very interested in companies that have high profits and stable dividend payments. Increasing investment and company profitability increase firm value. This study aims to examine the relationship between liquidity, company size, and earnings quality with firm value and dividend policy as moderators in this relationship. The secondary data used come from the 45 most liquid shares (LQ45) on the Indonesia Stock Exchange and have observations for 10 years from 2014 to 2023. The sample used is 450 data points and is tested using moderated regression analysis. The findings show that earnings quality and liquidity have significant effects on firm value. Conversely, there is no notable effect of firm size on firm value; large assets do not necessarily mean greater firm value if the assets are inefficient. Interactive effect analysis reveals that dividend policy moderates the association between liquidity and firm value, affirming its crucial role in facilitating firm valuation. Also, dividend policy affects the influence of earnings quality on firm value. However, dividend policy does not moderate the relationship between firm size and firm value. Such findings are especially valuable for investors as they indicate that liquid stocks tend to maintain stable dividend payouts, further affirming their value. Moreover, the study suggests that large assets necessarily lead to a greater valuation of a company unless paired with effective management strategies in a volatile business environment.