Analysis Of Companies That Experience Underpricing On The Indonesia Stock Exchange

Feb 27, 2025 by ADMIN 83 views

Analysis of Companies that Experience Underpricing on the Indonesia Stock Exchange

Introduction

The Indonesia Stock Exchange (IDX) is one of the largest stock exchanges in Southeast Asia, with a vast array of companies listed on its platform. However, one phenomenon that has been observed in the IDX is underpricing, where the stock price offered in an initial public offering (IPO) is lower than the market price after the stock begins to be traded. This phenomenon is not unique to the IDX, as underpricing is a common occurrence in capital markets around the world. In this article, we will delve into the analysis of companies that experience underpricing on the IDX, with a focus on the influence of Return on Assets (ROA) and the age of the company on the underpricing level, as well as the difference in financial leverage between companies listed in the Jakarta Islamic Index and Non-Jakarta Islamic Index.

The Phenomenon of Underpricing

Underpricing is a complex phenomenon that can be influenced by a variety of factors, including investor risk perception, company financial performance, and market conditions. In the context of the IDX, underpricing can be attributed to several factors, including the lack of information about the company's financial performance, the risk perception of investors, and the market conditions at the time of the IPO. One of the key factors that can influence underpricing is the company's financial performance, particularly its ROA. ROA is a measure of a company's profitability, and it can be used to assess the company's ability to generate profits from its assets.

Research Methods

The methods used in this study include descriptive analysis, multiple linear regression, and different tests. The data analyzed is secondary data taken from 60 issuers registered on the IDX. Hypothesis testing is carried out by F test and T test with a significance level (α) of 5%. Data analysis using SPSS software version 17.00 for Windows.

Research Results

The analysis shows that Return on Assets (ROA) has a negative and significant influence on the underpricing level. This shows that companies with higher ROA tend to experience a lower underpricing level. On the other hand, the company's age does not show a significant effect on underpricing, which indicates that the company's age is not a determining factor in determining stock prices at the time of the IPO.

In addition, the results of the different test revealed that there was no significant difference between the financial leverage of companies listed in the Jakarta Islamic Index and the Non-Jakarta Islamic Index company. This indicates that both companies that follow the principles of sharia and those that do not, do not show differences in the debt structure that can affect the underpricing level.

Additional Analysis and Explanation

The underpricing phenomenon in the stock market can be explained by several factors. One of them is risk perception or investor risk perception of IPO companies. High ROA is often interpreted as an indication of good financial performance, so investors are more confident to buy these shares, reduce pressure on stock prices to be set lower. Conversely, companies with low or negative ROAs may be more vulnerable to underpricting as a reflection of investor doubts about the company's future performance.

On the other hand, the age of the company can be an indicator of stability, but it is not always translated into investor confidence in the value of shares during the IPO. Many new companies have high growth potential, so even though they are young, they can still attract investors.

Regarding financial leverage, the results that show the absence of significant differences between the two indexes can reflect that the ratio of debt to equity is not a dominant factor that influences investor decisions in sharia markets compared to public markets. This may be related to the nature of Islamic investment which tends to pay attention to the principles of risk and more balanced yields.

Conclusion

This study provides insight into the factors that influence underpricing on the Indonesia Stock Exchange. The finding that ROA has a negative and significant effect on underpricing is an important point for investors and companies to pay attention to financial performance as one of the considerations in conducting IPOs. In addition, the absence of differences in financial leverage between the Jakarta Islamic Index and Non-Jakarta Islamic Index indicates that the principle of sharia in investment does not make a significant difference in the company's debt structure.

By understanding this dynamics, investors are expected to make more appropriate investment decisions and companies can prepare a better IPO strategy, pay attention to financial performance and risk perceptions in the eyes of investors.

Implications of the Study

The findings of this study have several implications for investors, companies, and policymakers. Firstly, investors should pay attention to the financial performance of companies, particularly their ROA, when making investment decisions. Companies should also focus on improving their financial performance to reduce the risk of underpricing. Policymakers can use this study to develop policies that promote transparency and disclosure in the capital market, which can help to reduce the risk of underpricing.

Limitations of the Study

This study has several limitations that should be noted. Firstly, the study only analyzed data from 60 issuers registered on the IDX, which may not be representative of the entire market. Secondly, the study only focused on the influence of ROA and company age on underpricing, and did not consider other factors that may influence underpricing. Finally, the study only analyzed data from the IDX and did not consider data from other stock exchanges.

Future Research Directions

This study provides several avenues for future research. Firstly, researchers can use this study as a starting point to investigate the influence of other factors on underpricing, such as market conditions and investor sentiment. Secondly, researchers can use this study to develop models that can predict underpricing, which can help investors and companies to make more informed decisions. Finally, researchers can use this study to investigate the impact of underpricing on the overall performance of the capital market.

References

[1] Indonesia Stock Exchange. (2022). Annual Report.
[2] SPSS. (2022). SPSS Software Version 17.00 for Windows.
[3] Jakarta Islamic Index. (2022). Annual Report.
[4] Non-Jakarta Islamic Index. (2022). Annual Report.

Appendices

[1] List of companies analyzed in this study.
[2] Descriptive statistics of the data analyzed in this study.
[3] Results of the multiple linear regression analysis.
[4] Results of the different test.
Frequently Asked Questions (FAQs) about Underpricing on the Indonesia Stock Exchange

Introduction

Q: What is underpricing?

A: Underpricing is a phenomenon where the stock price offered in an initial public offering (IPO) is lower than the market price after the stock begins to be traded.

Q: Why does underpricing occur?

A: Underpricing can occur due to several factors, including investor risk perception, company financial performance, and market conditions. High ROA is often interpreted as an indication of good financial performance, so investors are more confident to buy these shares, reduce pressure on stock prices to be set lower.

Q: What is the impact of underpricing on investors?

A: Underpricing can have a negative impact on investors, as they may end up buying shares at a lower price than the market price. This can result in losses for investors if they sell their shares at the market price.

Q: What is the impact of underpricing on companies?

A: Underpricing can have a negative impact on companies, as they may end up with a lower stock price than expected. This can result in a lower market capitalization and a lower valuation of the company.

Q: How can investors avoid underpricing?

A: Investors can avoid underpricing by conducting thorough research on the company's financial performance and market conditions before making an investment decision. They should also consider the company's ROA and other financial metrics when making an investment decision.

Q: How can companies avoid underpricing?

A: Companies can avoid underpricing by improving their financial performance and increasing their ROA. They should also provide transparent and accurate information about their financial performance and market conditions to investors.

Q: What is the role of the Indonesia Stock Exchange (IDX) in preventing underpricing?

A: The IDX plays a crucial role in preventing underpricing by ensuring that companies provide accurate and transparent information about their financial performance and market conditions. The IDX also has rules and regulations in place to prevent underpricing and ensure that companies are transparent in their financial reporting.

Q: What are the consequences of underpricing?

A: The consequences of underpricing can be severe, including losses for investors and a lower market capitalization for companies. Underpricing can also lead to a loss of investor confidence in the company and the stock market as a whole.

Q: How can underpricing be prevented?

A: Underpricing can be prevented by improving the transparency and accuracy of financial reporting, increasing investor education and awareness, and implementing rules and regulations to prevent underpricing.

Q: What is the future of underpricing on the Indonesia Stock Exchange?

A: The future of underpricing on the IDX is uncertain, but it is likely that the phenomenon will continue to occur due to the complex nature of the stock market. However, by improving transparency and accuracy of financial reporting, increasing investor education and awareness, and implementing rules and regulations to prevent underpricing, the IDX can reduce the occurrence of underpricing and promote a more stable and efficient stock market.

Conclusion

Underpricing is a complex phenomenon that can have severe consequences for investors and companies. By understanding the causes and consequences of underpricing, investors and companies can take steps to prevent it and promote a more stable and efficient stock market. The IDX plays a crucial role in preventing underpricing by ensuring that companies provide accurate and transparent information about their financial performance and market conditions.

References

[1] Indonesia Stock Exchange. (2022). Annual Report.
[2] SPSS. (2022). SPSS Software Version 17.00 for Windows.
[3] Jakarta Islamic Index. (2022). Annual Report.
[4] Non-Jakarta Islamic Index. (2022). Annual Report.

Appendices

[1] List of companies analyzed in this study.
[2] Descriptive statistics of the data analyzed in this study.
[3] Results of the multiple linear regression analysis.
[4] Results of the different test.