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Political Risk and Stock Returns in Indonesia

Author

Listed:
  • Paulina Yuritha Amtiran

    (Economic and Business Faculty, Universitas Nusa Cendana, Indonesia Author-2-Name: Rina Indiastuti Author-2-Workplace-Name: Universitas Padjadjaran, Bandung, Indonesia)

Abstract

"Objective � The research aims to find the relationship between the political risk with stock returns. Methodology/Technique � Using the purposive sampling, secondary data on 30 companies listed in Indonesia Stock Exchange (BEI) of the year 2007-2015. Analysis technique used is weighted least square regression Findings � The results of study Political risks significantly positively associated with stock returns. These results imply a change from the shock of political risk will affect cost of capital of the company increased, causing the company's stock price will go up which in the end impact on improving the company's stock returns obtained. Novelty � The study implies Shock due to the change of political risk has a direct impact on the company's financial condition primarily of the cost of capital companies because it involves policy and investment decisions are made in Indonesia."

Suggested Citation

  • Paulina Yuritha Amtiran, 2017. "Political Risk and Stock Returns in Indonesia," GATR Journals jfbr129, Global Academy of Training and Research (GATR) Enterprise.
    • Handle: RePEc:gtr:gatrjs:jfbr129
    as

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    References listed on IDEAS

    as
    1. Bilson, Christopher M. & Brailsford, Timothy J. & Hooper, Vincent C., 2002. "The explanatory power of political risk in emerging markets," International Review of Financial Analysis, Elsevier, vol. 11(1), pages 1-27.
    2. Kim, Chansog (Francis) & Pantzalis, Christos & Chul Park, Jung, 2012. "Political geography and stock returns: The value and risk implications of proximity to political power," Journal of Financial Economics, Elsevier, vol. 106(1), pages 196-228.
    3. Kirt C Butler & Domingo Castelo Joaquin, 1998. "A note on political risk and the required return on foreign direct investment," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 29(3), pages 599-607, September.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Ding, Qian & Huang, Jianbai & Gao, Wang & Zhang, Hongwei, 2022. "Does political risk matter for gold market fluctuations? A structural VAR analysis," Research in International Business and Finance, Elsevier, vol. 60(C).

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    More about this item

    Keywords

    BEI; Market Capitalization; Market Returns; Political Risk; Stock Returns.;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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