information leakage before the event, while not being too long to face problems with confounding events falling within the event window. Cumulative abnormal returns
CAR
it
for each firm are computed by summing up the firm’s abnormal return during the event window Equation 4.
N t
1 t
it it
ε N
1 CAR
4
4
4.2 Data and Sample
[INSERT TABLE 4 HERE]
Table 4 shows the sample selection procedure. We started with 35 firms listed in IDX that categorized as firms whose activities deal with or related to the management of
natural resources. Then we filtered out 1 firm due to inactive share price movement, 9 firms because of insufficient share price data and 4 firms with confounding events. This
finally limits our sample into 19 firms. Our share price data is obtained from Indonesia Share Market Database ISMD while accounting data is collected from OSIRIS
database. To calculate LOGTA, ROE and LEV we use the year data immediately prior to the event day 2006 data.
[INSERT TABLE 5 HERE]
Table 5 illustrate that the sample used in this study is distributed across 4 industries and 7 sub industry based on IDX industry classification. The sample
constitutes 10 firms from Mining industry 47, 8 firms from Basic Material and
4
In equation 3,
it
CAR
is the cumulative abnormal return for firm i in time t and N is the number of days in the event widow.
Chemical industry 38, 1 firm from Infrastructure, Utility and Transportation industry 5 and 2 firms from Agriculture industry 10.
5. Empirical Results
5.1 Descriptive Statistics
Table 6 reports descriptive statistics for abnormal returns and selected firm characteristics for the 21 sample firms. Panel A and B show the descriptive statistics for
daily abnormal return AR and 3-day cumulative abnormal returns CAR surrounding the passage of CSR mandatory implementation law. Meanwhile, Panel C describes the
descriptive statistics for independent variables. Panel A in Table 6 suggests that the daily AR from day -1 to day +1 for July 20
event window the approval of the PT bill that included mandatory CSR implementation is positive. The AR also remained positive when the returns are accumulated for 3 days as
illustrated in Panel B. Panel C in table 4 depicts the independent variables for our sample. In terms of size as shown by the LOGTA variable, firms in the sample are quite similar in
size as indicated by mean median of sample LOGTA is 15.13 15.06. Furthermore, the sample consists of quite profitable firms as mean median of ROE variable is 0.14
0.11. Moreover, Panel C in table 4 illustrates that the sample primarily consists of medium leverage firms as shown by LEV variable with mean median of 0.26 0.18,
which means that the firms in the sample have approximately 26 long term debt in proportion to its total equity. In terms of AGE the company’s age mean median is 30.48
27.00 year.
5.2 Correlation Matrix
