1373
Coefficients
a
.090 .135
.670 .505
-.178 .359
.110 .054
.188 2.033
.045 .003
.217 .037
.015 .225
2.422 .017
.007 .067
.189 .065
.268 2.891
.005 .059
.319 Constant
O TA
C Model
1 B
Std. Error Uns tandardized
Coeff icients Beta
Standardized Coeff icients
t Sig.
Lower Bound Upper Bound
95 C onf idenc e Interv al f or B
Dependent Variable: Disc a.
The coefficient of ownership structure is 0.110 and significant level at 5 . So, this study finds that there is a positive relationship between ownership of large
shareholders and level disclosure. This finding supports the assertion that greater ownership of large shareholders will enforce management to implement high disclosure
policy in order to assure management act in the best interest of shareholder. This study finds that the coefficient of total asset is positive 2.422 and
significant at the 5 level p-value = 0.017. Therefore, the result proves that larger asset will enforce firms to increase their disclosure level. This finding supports the argument
that: 1 potential loss caused by agency problem is higher for company with large assets Foster 1986; McKinnon and Dalimunthe 1993; Bradbury 1992; and Berger and
Hann 2002 ; β increasing transparency of large total assets will show company‘s good
reputation. Furthermore, company will get easier access to external financing Sengupta, 1998.
The coefficient of competition is positive 2.891 and significant at the 1 level 0.005. Thus, higher competition encourages the company to increase their disclosure.
This finding supports the argument that companies in a highly competitive environment will have a greater incentive to disclose because the potential loss of market share is
relatively lower than low competitive environment. Releasing additional information is beneficial to the company because it could reduce asymmetric information between
management and the shareholders Hayes and Lundholm 1996; Harris 1998; Botosan and Stanford 2005, Harris 1998; Botosan and Stanford 2005.
1374
V. CONCLUSION AND IMPLICATION
This study shows that disclosure levels of listed companies in the Indonesia Stock Exchange are affected by: 1 internal factors: i.e., ownership of large shareholder and
total assets; 2 external factor, i.e. competition. Using Botosan Index as a proxy of company disclosure and Herfindahl Index as a proxy of competition, the results show that
ownership of large shareholders, total assets, and competition have a positive influence on level of disclosure. The implication of this study is that the government should play an
active role to encourage favorable business competition so the high competition can motivate companies to implement high disclosure. Furthermore, regulator on stock
exchange Bapepam LK and the Indonesia Stock Exchange should improve the mechanism to increase disclosure level of public listed companies in Indonesia in order to
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1378
THE IMPACT OF SMOKING BAN FATWA ON INDONESIAN TOBAC CO‟S
COMPANY: EVIDENCE FROM STOCK MARKET RETURN
Gatot Soepriyanto, Paulina Santoso Binus University
Abstract
The objective of this study is to assess the share price reactions to smoking ban fatwa on Indonesia t
obacco‘s company. We expect that the smoking ban fatwa in the world‘s largest εuslim population will hit the tobaccos industry revenues, lower tobacco‘s
company profit and eventually affect the share price of those firms. We use event study methodology and standard market model to calculate abnor
mal returns of the tobacco‘s firms related to the news of smoking ban fatwa. Our study failed to find a statistically
significant effect of smoking ban fatwa on tobacco‘s firm stock market return. It suggests
that the investors do not see the fatwa as a factor that may control the tobacco consumption in Indonesia
– thus it may not affect the tobacco‘s firm revenues and profit in the future
Keywords: smoking ban fatwa, tobacco industry, event study.
1. INTRODUCTION
The purpose of this study is to examine the impact of smoking ban fatwa on share price of Indonesian tobacco‘s company. Given the recent introduction of the fatwa,
the effect of such restriction is unknown. Understanding how the financial market will react to the restriction of this nature is important; as firms that are engaged in tobacco
industry might find that the fatwa will hit their revenues, thus will lower their profit and eventually affects the future prospect of their business.
The ulema‘s decision to ban smoking in public, children and pregnant woman has fueled the debate whether the
decision will have an impact in the tobacco industry which provide work for millions workers.
The first argument is that the decision will affect the industry as most of Indonesia‘s populations are εuslims; hence it is most likely they will adhere to the fatwa.
As a consequence it may hit the business i.e. tobacco producer that it could trigger a drop in cigarette output. The second argument is that the fatwa did not apply a blanket
ban on smoking; it instead issued a fatwa placing more limited restrictions on tobacco
1379
use. In addition, even though Indonesia is the largest Muslims country in the world, Indonesia has been known as a secular country where the fatwa is not legally binding for
Muslims. Therefore one may argue that little effect will occur to the tobacco business. Our study failed to find a statistically significant negative abnormal return as an
effect of smoking ban fatwa on tobacco‘s firms. It provides evidence that the investors do
not see fatwa as a factor that may control the tobacco consumption in Indonesia – thus it
may not affect the tobacco‘s firm revenues and profit in the future. Additional test by comparing the abnormal returns of firms in tobacco industry and banking industry
– as control group
– provide a support our conclusion. We do not find a statistically significant difference between abnormal returns of firms in tobacco industry compare to firms in
banking industry in the event date of smoking ban fatwa news. The remainder of the study is organized as follows. A background to the smoking
band fatwa issuance is provided in section 2. Development of hypotheses and literature review are discussed in Section 3, and Section 4 presents data selection. Section 5
illustrates the methodology of the study and Section 6 reports the results. Section 7 summarizes the study.
2. REGULATORY BACKGROUND
Smoking is widespread in Indonesia, with cigarettes among the cheapest in the world at around 2 a pack, Indonesia is the worlds No. 5 tobacco market. Many
Indonesians also have a strong cultural affinity with smoking, with pressure to hang out and smoke after celebrations for births or weddings in villages across the archipelago.
Some cities in Indonesia, including Jakarta, have banned smoking in public places, but the rules are widely ignored. The US8 billion tobacco industry in Indonesia plays an
important economic role, with tax on cigarettes accounting for about 10 per cent of government income in the past, while the sectors provide millions of jobs.
