Arief Rijanto

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 investors’ 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 significant 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.

There is relatively little research exploring the benefits of political connection status decisions for firms experiencing financial difficulties in emerging markets. This paper investigates financially distressed firms that benefit from their political connection status in Indonesia. This study uses three measurements of financial distress as the dependent variables: Altman Z-score, negative working capital, and interest coverage ratio. Firm size, profitability, liquidity, leverage, and operating cash flow are independent variables. Quarterly data for the period from 2012 to 2018 from 327 non-financial companies were obtained from the Indonesia Stock Exchange. To analyze the relationship between financially distressed companies and decisions on the status of political connections as supporters or opponents, the random effects probit model (REPM) was used. The results show that firms with political status as opposition to the government have a strong positive correlation with experiencing financial difficulties. Meanwhile, companies with political connections as government supporters have a strong negative correlation. Companies with politically connected status as opposition experience financial difficulties in terms of negative working capital and interest coverage ratios. Then, debt financing was not found to be a significant problem for financially distressed companies with a political support status of the government. There are indications that they have benefited from political connections, such as more accessible debt financing.