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Academic Journal of Economic Studies
Vol. 5, No. 1,
March
2019, pp. 74–79
ISSN 2393-4913, ISSN On-line 2457-5836
74
Does Indonesia Sustainability Reporting Award (ISRA) Cause Abnormal Return and Stock
Trading Volume: A Comparative Analysis
Hasan Basri1, Cindi Paramita Februari2, M. Shabri Abd. Majid3
1,2,3 Faculty of Economics and Business, Syiah Kuala University, Indonesia, E-mail: p_haasan@unsyiah.ac.id (Corresponding author)
Abstract
Indonesia Sustainability Reporting (ISRA) Award-winning companies promote the image of companies in the eyes of the public. In addition, award-
winning companies cause their stock prices to change, representing by their stocks’ abnormal return and changes in trading volume of the
company. This research is aimed at empirically examining the influence of the a Indonesia Sustainability Reporting Award (ISRA) on the abnormal
return and stock trading volume of the ISRA award-winning and non-winning companies for 2010-2014 period. It also attempts to test the
differences in abnormal return and stock trading volume before and after the companies won the ISRA Award. The results showed that: (1) The
ISRA award has no influence on the abnormal return of award-winning and non-winning companies; (2) The ISRA award did not influence the
stock trading volume of the award-winning and non-winning companies; (3) There was no difference in abnormal return before and after the
companies won the ISRA award; (4) There was differences in abnormal returns before and after the companies won the ISRA award; (5) There
was no difference in stock trading volume before and after the companies won the ISRA award; and (6) There was difference in stock trading
volume before and after the companies won the ISRA award. These findings showed that the ISRA award was perceived by the firms as the usual
award, thus failed to cause the abnormal returns and stock trading volume.
Key words
ISRA award announcement, abnormal return, stock trading volume
JEL Codes: G11
© 2019 Published by Dimitrie Cantemir Christian University/Universitara Publishing House.
(This is an open access article under the CC BY-NC license http://creativecommons.org/licenses/by-nc-nd/4.0/)
Received: 9 December 2018
Revised: 26 December 2018
Accepted: 10 January 2019
1. Introduction
Investors and potential investors need information that can be used as a basis for making a decision. Financial statements
are one source of information for them in assessing the performance of the company and as a key reference in making
investment decisions. But along with the development of global issues related to environmental and social aspects,
investors begin to realize that the information disclosed in the company's financial statements cannot be the only reference
in assessing the condition of the company, especially the sustainability of the company in the future.This is because
environmental problems now become something that is very important for the company, because in addition to production,
the company also should not damage the surrounding environment and the company must restore the damage caused to
the company’s production process (Linuwih, 2014). In addition, good news information in the form of award announcement
event containing information that can cause a market reaction and also will impact on the decision to be taken by investors
who then influence the abnormal return and stock trading volume of a company, where one of the events is Indonesia
Sustainability Reporting Award (ISRA).
According to Armin (2011) ISRA is an award given to companies that have made reporting on activities and who have
published sustainability reports concerning environmental and social aspects in addition to economic aspects to maintain
the sustainability of the company itself.Based on signalling theory, the announcement of Indonesia Sustainability Reporting
Award (ISRA) is an announcement that has information content to give a positive signal for the award-wining company,
because it has good prospect in the future so that it can attract investors to buy stock, where stock market reactions can be
seen through changes in stock prices after the announcement is announced. Furthermore, award-winning companies will
also feel a change in their stock prices, which can be seen from the stock trading volume of the companies. In connection
with this, in addition to stock prices, the stock trading volume also has to do with the presence of information in the capital
market. Stock trading volume is related to investor behavior in transactions.
This research has also been done by some previous researchers, such as Linuwih and Yeterina (2014) conducting a
research to analyze the difference of market reaction at the winning company of Indonesia Sustainability Reporting Award
(ISRA).A similar research was also conducted by Akis et al. (2012) doing a research to examine the influence of the
announcement of Indonesia Sustainability Reporting Awards on abnormal return and stock trading volume. The difference
of this research with previous research is that previous researchers only look at award-winning companies only, while in
Academic Journal of Economic Studies
Vol. 5 (1), pp. 74–79, © 2019 AJES
75
this research besides seeing the influence on the award-winning companies, the influence on companies that do not
achieve awards is also seen. In addition, in this research, the time range studied was also longer which was 5 years. This
article aims to analyze the influence of Indonesia Sustainability Reporting Award (ISRA), to the abnormal return and stock
trading volume of ISRA winning and non-winning companies 2010-2014. The rest of paper is structured as follows: Section
2 provides the review of relevant literature. Section 3 explained the research method used on which the analyses of the
study are based. The findings are discussed in Section 4, and Finally, the conclusions are provided in the last section of
the paper.
2. Literature Review
2.1. The Announcement of Indonesia Sustainability Reporting Award (ISRA)
The Indonesia Sustainibility Reporting Awards (ISRA) is a tribute to companies that have conducted sustainability reports,
either published separately or integrated in annual reporting. Assessment indicators include completeness (40%), credibility
(35%) and communications (25%) of company reports. According to Darwin (2012) “Indonesia Sustainibility Reporting
Awards is an intercompany competition in the preparation of CSR report that contains the company's performance in three
aspects, such as economic, environmental and social aspects”.
The purpose of the Indonesia Sustainability Reporting Awards is to provide recognition to companies that report and
publish information on integrated environmental, social and information sustainability. Along with the global issues such as
global warming, ISRA is expected to provide motivation to the company to pay more attention to the environmental and
social aspects in addition to economic aspects by applying Sustainability Reporting, so good corporate governance will be
formed. Sihotang (2007) defines sustainable reporting as a report on its economic, social and environmental aspects in
terms of rules, impacts and performance of the company and its products in the context of sustainable development (triple
bottom line reporting).The disclosure of social responsibility in the annual report is one of the ways companies building,
maintaining, and legitimating corporate contributions from the economic and political side (Guthrie and Parker, 1990).
Satyo (2005) states that investors experience changes in investment outlook by starting to consider the company's concern
for the environment. In connection with these opinions ISRA provides benefits to investors and potential investors in
realizing their views. In addition, ISRA can also be used as an additional reference in decision making for investors and
potential investors.
2.2. Abnormal Return and Stock Trading Volume
Companies that can win the award will also feel a change in their stock price which can be seen from the stock's abnormal
return and stock trading volume. According to Samsul (2006) Abnormal return is the difference between actual return and
expected return that may occur before the information is published or leakage of information has occurred after the official
information is published.While Hartono (2007) suggests that the abnormal return or excess return is the excess of the
actual return occurring against the normal return. The normal return is the expected return (return expected by the
investor). Stock trading volume is the number of units of stock units traded in a certain period, usually daily (Sutrisno, 2000;
Khaldun and Muda, 2014). According Gunawan (2004) trading volume activity is an instrument used to see the reaction of
capital markets to an information through the parameters of the movement of stock trading volume. According to Hartono
(2010), Mahdaleta et al. (2016) and Muda (2017) information published as an announcement will provide a signal for
investors inmaking investment decisions. If the announcement is a good signal (good news) for investors then there is a
change in the stock trading volume.
3. Methodology of Research
This research was hypothesis testing. Hypothesis testing usually explains the nature of a particular relationship, or
determines the differences between groups or the independence of two or more factors in the situation (Sekaran, 2006).
Unit of analysis in this research was company. In this research time horizon used was pooling data/data panel. According to
Gujarati (2003) the data panel is a combination of time series and cross-sectional, which is the same unit researched over
time. The data panel used was an unbalanced data panel because this research has a different number of observations for
each time/period. The population used in this research was the participants who follow the ISRA award in 2010-2014period,
in other words is ISRA award-winning and non award-winningcompanies. The sampling technique used was by census. A
census is a means of collecting data in which all elements of the population are investigated one by one. The research
target population used in this research can be seen in Table 1.
Academic Journal of Economic Studies
Vol. 5 (1), pp. 74–79, © 2019 AJES
76
Table 1. Research Population
Type of Companies
Number of Companies
ISRA Winning Companies
ISRA Non-Winning Companies
2010
2011
2012
2013
2014
2010
2011
2012
2013
2014
Agriculture
1
0
0
0
0
1
1
0
1
0
Mining
6
1
3
3
3
1
1
2
1
2
Basic Industry and
Chemistry
1
0
2
2
1
1
1
2
0
1
Other Industries
0
1
1
1
0
1
0
0
0
0
Consumption Goods
Industry
0
0
1
1
0
0
2
0
0
0
Property, Real Estate &
Building Construction
0
1
1
0
1
0
1
1
1
0
Infrastructure, Utilities &
Transportation
2
3
3
2
2
2
1
1
3
0
Finance
2
2
1
3
3
0
0
2
3
3
Trade, Service &
Investment
1
0
0
0
1
0
1
1
1
0
Total of Population
56
39
Source: Processed Data 2016
This research was an event study, so the observation period for the calculation of research variables was done 5 days
before the date of the announcement and 5 days after the date of the announcement of the Indonesia Sustainability
Reporting Award.The reason for choosing this time period was because the number of working days of the stock in a week
is 5 days, so it can be said that the taking of the event period of this research is a week before and a week after the
announcement of ISRA. Observation period of this research variable can be seen in Table 2.
Table 2. Research Observation Period
Year
(t-5)
(t=0)
(t+5)
2010
December 7 – 14
Wednesday-Desember15
December16 – 22
2011
December 14 – 20
Wednesday-December 21
December 22 – 28
2012
November26 -30
Monday- December 3
December 4 – 10
1013
Descmber10 – 16
Tuesday- December17
December 18 – 24
2014
December3 – 9
Wednesday-December 10
December 11 – 17
Source: Processed Data 2016
Data analysis was done by using statistical analysis that was using regression analysis technique and difference test of
paired samples test; regression model used in this research was linear regression with dummy variable.The model used is
as follows:
Y1 = α + β D + ε (1)
Y2 = α + β D + ε (2)
Where, Y1 is an abnormal return; Y2 is the stock trading volume; α is a constant; β is the regression coefficient; D is a
dummy variable; ε is an error. To test the hypothesis in this research, the writer used the t test at the confident level
(confident level of 90%) or the error rate (alpha) α of 0.10.
If the statisctis of tcount>statisctis of ttable, Ho is rejected
If the statisctis of tcount<statisctis of ttable, Ha is rejected
At the confident level (convidentlevel 90%) or the error rate (alpha) α of 0.10 then if the significance value is between (0-
0.10), it means that the hypothesis is accepted and vice versa if significant value is less than 0 or more than 0.10 then the
hypothesis is rejected (Santoso, 2000).
4. Findings and Discussions
The results of testing the influence of the announcement of Indonesia Sustainability Reporting Award 2010-2014 to
abnormal return and stock trading volume are as follows:
Academic Journal of Economic Studies
Vol. 5 (1), pp. 74–79, © 2019 AJES
77
Table 3. Results of Dummy Regression of First and Second Hypotheses
Model
First hypothesisa
Second hypothesisb
Unstandardized Coefficients
T
Unstandardized Coefficients
t
B
Std. Error
B
Std. Error
Constant
-0,009
0,009
-1,037
0,002
0,001
2,547
-0,007
0,011
-0,656
0,001
0,001
1,176
a.Dependent Variable: CAR; b.Dependent Variable: TVA
Source: Processed Data (2016)
The significance value obtained in this first hypothesis test is 0.513 so that it can be concluded that the announcement of
Indonesia Sustainability Reporting Award (ISRA) 2010-2014 has no influence on the abnormal return of winning and non-
award winning companies because the value of significance obtained is greater than 0.10 (> 10%).It can also be deduced
that the alternative hypothesis (Ha1) in this research was rejected and the null hypothesis (H01) was accepted.It can be
concluded that the announcement of ISRA is not the only one aspect of the indicators expected by investors. Investors do
not only consider the ISRA announcement as a consideration, but investors are also more likely to have the idea of how the
company can manage the funds invested in the company and the achievement of expectations from all investors.The
results of this research are consistent with the results of research from Suci (2010) and Prayoso and Hari (2013) indicating
that sustainability reporting has no significant influence on abnormal return of stock either prior to the publication of the
report, during the report publication or after the publication of the report. Information in the sustainability report and
corporate social responsibility report has not been able to influence investors in determining investment decisions in the
capital market.
The significance value obtained in this second hypothesis testing is obtained at 0.242 so it can be concluded that the
announcement of Indonesia Sustainability Reporting Award (ISRA) 2010-2014 does not influence the stock trading volume
of the award-winning and non- award-winning companies because the value of significance obtained was greater than 0.10
(> 10%). It can also be concluded that the alternative hypothesis (Ha2) in this research was rejected and the null
hypothesis(H02) was accepted.It can be concluded that the market does not respond in response to the information. This
may be due to many factors, such as a lack of investor understanding of the importance of sustainability reporting or lack of
widespread dissemination of information about the winner's announcement so that investors are unaware of the
award.Investors tend not to respond to the announcement of ISRA as an information that is considered good or good news
because the trust aspects of investors can influence the stock market such as the increase in stock prices (Budiman and
Supatmi, 2009). The result of this research is in accordance with the research of Linuwih and Yeterina (2014) indicating that
there is a difference in trading volume around the announcement of ISRA, especially on five days and two days before the
announcement, as well as on the first day and the second day after the announcement.
Table 4. Testing of Third and Fourth Hypotheses
Third hypothesisa
Fourthhypothesisb
Paired Differences
t
df
Sig. (2-tailed)
Paired Differences
t
df
Sig. (2-
tailed)
Mean
Mean
Pair 1
CAR –BEFORE ISRA -
CAR AFTER ISRA
-0,001
-0,139
55
0,890
0,015
2,117
38
0,041
a.Dependent Variable: CARaward-winning companies
b. Dependent Variable: CAR non-winning companies
Source: Processed Data (2016)
The results of the third hypothesis test in this research can be seen in Table 4. Based on Table 4, it can be seen that the
value of t count obtained at -0.139 with a significance level of 0.890. Because the level of significance was > 0.10 it can be
concluded that the average abnormal return before and after the announcement in the ISRA award-winning company is the
same (no different) or in other words H01 (null hypothesis) is accepted and Ha1 (alternative hypothesis) is rejected.From the
result of data analysis there is no difference of abnormal return before and after announcement of ISRA award. It is very
likely that investors in the Indonesian capital market pay more attention to other various information contained in the annual
report. For example, Cheng and Christiawan (2011) who also conducted research on companies in Indonesia found that
information on return on equity also had a significant influence on abnormal return. Not only that, Djam'an et al. (2011)
found that information about current cash from operating activities, cash flows from investment activities and accounting
Academic Journal of Economic Studies
Vol. 5 (1), pp. 74–79, © 2019 AJES
78
earnings also have a significant influence on the abnormal return of stock. The result of the fourth hypothesis test in this
research can be seen in Table 4. Based on Table 4 it can be seen that the value of t count was obtained by 2.117 with a
significance level of 0.041. Due to the significance level obtained at <0.10 it can be concluded that the average abnormal
return before and after the announcement on the ISRA non award-winning company is different (unlike) or in other words
H01 (the null hypothesis) is rejected and Ha1is accepted.This result also proves that if ISRA participant company does not
get ISRA award it will not make stakeholder move to ISRA winning-company. The result of this research has similar result
to Armin research (2011) which proves ISRA announcement has an influence on abnormal return and stock trading volume
judging from the existence of difference of abnormal return and stock trading volume before and after date of
announcement.
Table 5. Testing the Fifth and Sixth Hypotheses
Paired Samples Test
Fifth Hypothesisa
Sixth Hypothesisb
Paired Differences
t
df
Sig. (2-tailed)
Paired Differences
t
df
Sig. (2-tailed)
Mean
Mean
Pair 1
TVA–BEFORE ISRA -
TVAAFTER ISRA
0,001
1,264
55
0,212
0,000
1,970
38
0,056
a. Dependent Variable: TVA award winning-companies
b. Dependent Variable: TVA award non-winning-companies
Source: Processed Data (2016)
The result of the fifth hypothesis test in this research can be seen in Table 5. Based on Table 5, it can be seen that the
value of t count was obtained by 1.264 with a significant level of 0.212. Because the level of significance obtained was at >
0.10 it can be concluded that the average stock trading volume before and after the announcement of ISRA award-winning
companies is there is no difference or in other words H01(null hypothesis) is accepted and Ha1(alternative hypothesis) is
rejected.This shows that investors do not consider that the announcement of ISRA winner is an information in investment
decision making, because the application of sustainability reporting in Indonesia is still voluntary and its application requires
a lot of funds. An investor can even consider this as a waste action that can reduce the profit of the company, in which if the
profit is reduced significantly, then investors are reluctant to invest or in other words the announcement of ISRA is
responded negatively by the market.This also happened in previous research conducted by Hendrawijaya (2009), the
absence of a significant market reaction reflects that investors assume that disclosure of sustainability information is not
good news that will influence them in making investment decisions, so there is no significantdifference in trading volume.
The result of the sixth hypothesis test can be seen in Table 5. Based on Table 5 the value of t count obtained by 1.970 with
a significance level of 0.0564. Since the significance level was < 0.10, it can be concluded that the average stock trading
volume before and after announcement on theISRA awardnon-winning company has no difference or in other words Ha1
(null hypothesis) accepted and H01 (Alternative hypothesis) is rejected.This research is in accordance with research
conducted by Akis and Mutmainah (2012) who state that there is no difference in the stock tradingvolume of companies
both before and after the ISRA announcement. Besides, this sixth hypothesis is not proven because many investors still do
not understand the concept of sustainability reporting and its usefulness so that there is no difference in stock trading
volume (Budiman and Supatmi, 2009).
5. Conclusions
Based on the results of hypothesis testing and analysis of research data, it can be concluded that the ISRA announcement
of 2010-2014 does not influence the abnormal return and stock trading volume of the award winning and non-winning
companies. Furthermore, there is no difference in abnormal returns before and after the announcement of Indonesia
sustainability Reporting Award (ISRA) in award-winning companies, but there is difference in abnormal return before and
after the announcement of Indonesia Sustainability Reporting Award (ISRA) in award non-winning companies. In addition,
the results of the research also show that there is no difference in stock trading volume before and after the announcement
of Indonesia Sustainability Reporting Award (ISRA) at award-winning companies, and there is difference in stock trading
volume before and after the announcement of Indonesia Sustainability Reporting Award (ISRA) at non-winning companies.
Academic Journal of Economic Studies
Vol. 5 (1), pp. 74–79, © 2019 AJES
79
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