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Table of Contents

CHAPTER 1............................................................................................. 3
INTRODUCTION...................................................................................... 3
I.1 Research Background.....................................................................3
I.2 Problem Identification and Statement............................................6
I.3 Research Scope and Limitation......................................................7
I.4 Research Objectives.......................................................................7
I.5 Research Benefits..........................................................................8
CHAPTER II............................................................................................. 9
LITERATURE REVIEW.............................................................................. 9
2.1 Capital Market............................................................................... 9
2.1.1 Definition of capital market....................................................9
2.1.2 Type of Capital Market..........................................................10
2.1.3 The Roles of Capital Market..................................................12
2.1.4 Capital Market Instruments...................................................13
2.2 Stock........................................................................................... 13
2.2.1 Definition of Stock.................................................................13
2.2.2 Types of Stock.......................................................................15
2.2.3 Stock Price............................................................................ 17
2.3 Stock split................................................................................... 18
2.3.1 Definition of Stock Split.........................................................18
2.3.2 Types of Stock Split...............................................................19
2.3.3 The Reason Companies Do Stock Split..................................20
2.3.4 Benefits of Stock Split...........................................................21
2.3.5 Theory in the Stock Split.......................................................21
2.4 Abnormal Return.........................................................................22
2.5 Trading Volume Activity...............................................................24
2.6 Previous Research Review...........................................................25
2.7 Theoretical Framework................................................................26
2.8 Articulating Hypothesis from Theoretical Framework..................26
CHAPTER III.......................................................................................... 27
DATA PROCESSING METHOD................................................................27
3.1 Research Method........................................................................27

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3.2 Sampling Method........................................................................27
3.3 Research Data............................................................................. 28
3.4 Research Variables......................................................................29
3.4.1 Definition of Operational Variable.........................................29
3.5 Analysis Data.............................................................................. 30
3.5.1 Descriptive Statistic..............................................................30
3.5.2 Normality Test.......................................................................30
Reference............................................................................................. 32

CHAPTER 1
INTRODUCTION

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I.1

Research Background
At the first time of the company was build, the owner hopes that the

company can maintain the viability of the company and also could earn much
profit. To reach that hopes, the owner needs much money to keep the company
still going concern in its business. That is becoming the main problem that should
be solved, because of the economic condition in Indonesia has not been stable yet,
it will be more difficult to solve.
The capital market could be one of a tool to solve that financial problem.
Capital Markets is one of the sources of external funding companies to improve
long-term capital needs of the company by selling shares and obligations.
According to Husnan (1994:3), capital market is the financial instruments
(securities) for the long run that could be traded either in the form of debt, that
published by the government, public authorities, or private parties. In Indonesia,
many companies that have been go public companies listed in the capital market.
They have listed in Indonesia Stock Exchange as one of the big capital market in
Indonesia.
The function of capital market is as a mediator between the companies
that needs the money to their operational activities and investors who will invest
their money in those companies. With the presence of capital market, expected
that the activity of economic will increase because the capital market is the
alternative funding for companies.
Investors will not invest their money, if there is no information that
could convince them that they should invest in those companies. By using the
relevance information that is prepared by companies, investors could value the
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According to Keown. it will be attract many investors. and quoted by Rohana. such as: 1. Companies that have go public. said that the manager has many reasons to do stock split. Stock split is a corporate action when the company divides the existing number of shares into multiple shares. Martin. One of kind the corporate action is stock split. may allow the changes such as price. so the investors could get the view of the risk and expected return of stock that owned by companies. have the desire to increase the value of the company. To bring the information about the investment opportunities in the form of increasing the earnings and cash dividend Stock split as one of the information that can be effect on the Indonesia Stock Exchange. Jeannet. Mukhlasin (2003). and the stockholders. One way that could increase the value of the company is a rising stock prices because the market price of the stock may be a reflection of the 4 . because the price of stock split is affordable than the stock price in the market. One of the important information is the announcement of the corporate action. Corporate action is the action that done by the companies that has the significant impact towards the continuity of operation. The company usually does this action when the stock price in the market is high. To make the stock price is not too expensive.prospect of a performance those companies itself. To restore the price and the size of the average stock trading to the range that has been on target 3. and also the volume of trade stock. Scott. so it will increase the amount of stockholders and also the liquidity of stock trading 2. yield. the price of stock. By issuing the stock split. Petty (1996).

The company issuing the shares must always pay attention to the price of its shares. If the increasing in stock price is overvalued by the market. The impact of stock split that has been done by the companies have been researched before there is the research gap from those researches. Moreover. and 5 .value of the company. Based on trading range theory which states that the stock split will cause the increasing of trading volume activity or the increasing of liquidity because the price is more attractive for investors. Abnormal Return is the amount of return realization security which is different with the expected return that is based on the return in the market and the relationship between security and market (Reilly and Brown. 2011: 155). this corporate action also will give the positive information and reaction because there will be the assumption if the stock split is a signal if there will be the improvement of the company’s performance that could increase the dividend for the investors. The presence of this information transfer is indicated by the significant of Abnormal Return in the other company’s stock in the same industry (Almilia and Kristijadi. This positive reaction will make the significant value of Abnormal Return. Based on the research that has been done by Grinblatt. This result can indicate that the stock split can cause the Trading Volume Activity changes significantly before and after the announcement of stock split. 2005). Not only for the Abnormal Return but also for Trading Volume Activity that positive reaction will effect. Masulis. it can resulted in decreasing the ability of investors and it also will affect to volume stock trading. The result of those past researches indicate there is the controversy according to the effect of stock split.

I. even from the some last researchers stated that there is no the significant changes for the average of Abnormal Return and Trading Volume Activity before and after the announcement of stock split. a company hopes that investors will consider it as a good news so there will be the positive value for the Abnormal Return and Trading Volume Activity around the announcement of stock split that could change significantly.Titman (1984) quoted from Sutrisno (2000) define. and increase the liquidity of stock in the market.2 Problem Identification and Statement The high price of stock caused the decreasing of investors’ abilities to acquire the stocks and also the liquidity of stocks. “Around the announcement of stock split shows there are abnormal stock behavior”. This contrast make the investors are confused because they want to get the high return from those stocks. by doing the stock split. (pg. make the price of stock is affordable. they want to get the positive value of Abnormal Return and Trading 6 . In this case. In fact. so the writer is interested in discussing further about the stock split. in the form of thesis titled "ANALYSIS THE MARKET REACTION TOWARDS ANNOUNCEMENT OF STOCK SPLIT INDICATED BY THE ABNORMAL RETURN AND TRADING VOLUME ACTIVITY FOR THE MANUFACTURE COMPANY LISTED IN IDX FOR THE PERIOD YEAR 2011-2014”.3) Based on the result of research about the stock split. in general there are two kind of different opinions towards the variables that has been researched. Stock split is one of corporate action that has done by the companies that can make the price of stock lower than before. Besides.

Is there the reaction of market toward the announcement of stock split? 2. I. The research subject is the financial statement of manufacturing companies that are listed in Indonesian Stock Exchange and available on Indonesia Capital Market Electronic Library. To analyze the difference of Abnormal Return and Trading Volume Activity before and after the announcement of stock split 7 . Do the Abnormal Return simultaneously giving the significant effect before and after the announcement of stock split on manufacturing company that are listed in Indonesian Stock Exchange? 3.3 Research Scope and Limitation Discussions of stock split only focused on the value of Abnormal Return and Trading Volume Activity before and after the announcement of stock split to public. Based on the topic above.Volume Activity.4 Research Objectives The researcher intended to achieve these following outcomes: 1. the problem would be identified as follows: 1. Do the Trading Volume Activity simultaneously giving the significant effect before and after the announcement of stock split on manufacturing company that are listed in Indonesian Stock Exchange? I. To analyze the stock reaction toward the announcement of stock split that is indicated by the Abnormal Return and Trading Volume Activity 2. The period of the financial statement that will be taken is 5 years from the year 2010 – 2014.

 For the company The results are expected to give the information for the company about decision for announcing the stock split to the public.  For the reader This research might be used as the additional knowledge and sources or reference for the future research. CHAPTER II LITERATURE REVIEW 8 . thinking logically and systematic to report the results of its research.5 Research Benefits As for the benefits to be gained for this research:  For the investor The results of this research are expected to be used as one of consideration in decision making for investors to invest and get the high return. To prove if the announcement of stock split is the corporate action that can give the economic benefit for the companies I.  For the researcher To gain clear understanding and knowledge in the application of stock split in the real to develop student’s ability to identify and solve problems.3.

16).1 Capital Market 2. (p. It also can be classified as money market and capital market in the term of claim maturity.1 Definition of capital market Fabozzi Modiglani.55) Mishkin and Eatkins states (2000). 9 .2. “Capital market is the market which longer-term debt (original maturity of year or greater) and equity instrument are traded”.1. The reason for the name instruments with such long maturities are likely to be associated directly with funding capital investment projects. and Jones (2010) describe financial market as the market where financial assets are exchanged or traded. Financial market provide the selling mechanism to the market participants and also help them to reduce the transaction cost like searching cost and information cost. Financial market can be classified by many ways like by the type of financial claim. There are two principal roles of financial market. It means the capital market is as a source of financing of the corporate world and the alternative investment for the investor. it can be classified as debt market and equity market. The other role is to determine the required return on financial assets as the effect of selling and buying activities. Miller and Van Hoose (2004) define that capital market is market for financial instruments with maturities of one year or more. (p. The first principal is to transfer fund from the party who has excess fund to the party who need additional fund to run their business.

The essential definition of capital market is the market where securities such as shares and bonds are issued to raise medium to long-term financing. Capital market has the numerous participants including individual investors. (p. fair. municipalities. and financial institutions.2 Type of Capital Market Sunariyah (2004) defines. 2. companies. and efficient stock trading. organizations. In conducting the activities. Gitman (2000) explains. capital market based on the types and the transactions: 1 Types of Capital Market  Primary Market 10 . institutional investors such as pension funds. the stock exchange is form objectives is to an administer an order. Besides. governments.Lawrence J. the capital market is held by Indonesian Stock Exchange. According to Law No. and where the securities are traded. 8 year 1995 Paragraph 2 Article 7. “The capital market is a financial relationship created by a number of institutions and arrangement that allows suppliers and demanders of long term to make transactions”.50). BAPEPAP has the role to give founding for the participant in stock exchange and organize the activities in the capital market. In Indonesia. Indonesian Stock Exchange is supervised by capital market supervisory agency (BAPEPAM).1.

2 The Capital Market In Terms of Transaction Process  Spot Market The financial market that is trade in the securities to be submitted spontaneously. It means if someone buys the financial services then at that time will also receive the services have been purchased. options.  Secondary Market Known by the aftermarket. This is the market for new long term equity capital where the securities are sold for the first time.  Future or Forward Market The financial markets where delivery of securities conducted in the future in accordance with the agreement.The part of the capital markets that deals with the issuance of new securities. bonds. it is the financial market where issued the previous securities and financial instruments like stock. the securities issued by the company to investors. In a primary issue.  Options Market 11 . and features that bought and sold. The transaction processing load the timing of the transaction agreement and the time of delivery should be to do so requires a transfer of wealth–term certain time. The stock price in this market defined by the government and offer between seller and buyer according to market mechanism.

With the capital markets. 2. the choice is approval or contractual rights of shareholders to buy or sell in certain time. such as:  The stock market will be an alternative as a collector of funds other than banking system.1. so the capital market will be more liquid and efficient  A media of allocation the fund from lender to borrower Besides. (pg.4 Capital Market Instruments 12 .1.  Capital markets allow investors to have a variety of investment options according to their risk preferences. stock market also is an indicator of success to determine the economic condition a country". Husnan (2001). The roles of capital market such as:  A media to improve the company needs in the long term by selling the shares and issuing bonds  To attract the buyers and sellers to participate. defines “The existence of capital markets has some appeal from the investors.3 The Roles of Capital Market Jogiyanto (2003) states. Capital markets allow companies to issue the securities in the form of a letter of debt (bonds) or a certificate of ownership (stocks). " Capital markets have important role in a country.Financial market that trade the right to determine the choice of (sell or buy) to stocks or bonds.11). allowing investors to diversifying investments according to their risk responsibilities and level of benefits they expect. 2.

are as follows:  Shares (stock). The notion of some instruments usually appear in the capital market. a right granted to the previous shareholders to purchase additional new shares issued by an enterprise. a letter of ownership or possession a person or entity within a company. 2.The principle of capital market instruments are all of kinds the securities. the valuable letter is called stock.  Rights.2 Stock 2.2. the rights granted to the owner bonds to buy a certain number of shares in the future with the price that has been decided before. is the evidence of the issuer's debt which is guaranteed by the insurer that contains a promise of the final payment or other appointments that will be paid on the maturity date. Tandelilin (2001) states.1 Definition of Stock There are valuable letter that go public company have and declare that the one who buy it from the company through capital market will become one of the owners of the company.  Warrant.  Bond (Bond) . “Share is proof ownership of the asset one of the company that issued the shares by owning shares of a company. 13 . and the investor will has the right to get the income and the company’s wealth after deducting the payment of all company’s liabilities”.

“stock is the evidence of the company’s ownership. Based on Syahrul et all (2000) by buying stock the shareholders will obtain dividend.Griffin and Elbert (2002) define. According to Kertonegoro (2001). there are three objectives of the investors that buy stock/shares in the capital market. and credit and dominance toward the company where the shareholders have the shares. which are: 14 . By buying the stock of the company the shareholders have become the one of the owner of the company. Each shareholder is a part of the owner that company. capital gain. so they are entitled to a portion of profits.51) The nature of the investment is to provide a role for investor to gain the profits. (pg. Weston and Copeland (2001) defines. However the right is limited because the shareholders entitled to an enterprise income only after all liabilities are met. Stock can be defined as a sign of ownership or possession of a person or entity to a corporation or limited liability of the company”.” The stock price of the company that are offered in the capital market can be increasing or decreasing from the book value of the stock. Share or stock is the evidence of the shareholders that shareholders have become one of the owners in one company that sell their share or stock in the capital market. Kertonegoro (2001) stated that stock is a form of the investor participation in equity capital or the evidence of the ownership of the company. and it depends on the net income of the company.

15 .  Registered stock Registered stock is the stock that shareholders name will be written in there. 2. stock can be divided as:  Bearer stock Bearer stock is the stock that the name of the shareholder is not written to make the change of the ownership of the stock from one investor to another investor can be change easily.  As source of revenue means that the investor will prioritize on the stock that can generate high dividend. As capital accumulation means that investors will prioritize long term investment. which are: a Grounded on the method of the vote to transfer. stated that the stock can be classified into three types.2. and the company are in a good condition. it means that the investor will prioritize the principal security.2 Types of Stock Fakhruddin and Hadianto (2001:12). thus they can search the stock that are still growing to obtain capital gain or the stock that can generate dividend  As a warehouse value. which means that the investor will search and buy blue chip stock and other non-speculative stock. where the change of the ownership of the stock from one investor to another investor must pass through procedure.

 Growth stocks 16 .  Income stocks Income stocks are the stock of the company that can pay the dividend higher than the average dividend from the previous period. stock can be divided as:  Blue chip stocks The stock of company that have high reputation as the leader of the industry compare to the other company that are in the same industry and the dividend that are paid to the shareholder that hold blue chip stocks will be divided in stable and constant period. stock can be divided as:  Common stock The stock that does not have any special rights/authority and the shareholders will be placed last in distribution of the dividend.b Grounded on the method of the claim.  Preferred stock The stock that have specialize rights/authority and it has the characteristic combination between bond and common stock because it can produce constant revenue (like the interest in bond) but it also can have a result which is unexpected to the investor. c Grounded on the method of the stock performance.

17 .  Counter cyclical stocks The stock that will be not influenced by the conditions of macroeconomic or the general business situation. but it has the ability to produce higher revenue in the future even though it is not certain matter.3 Stock Price The stock value will be paid by the investors depend on the results are expected to be accepted and the risk involved in the purchase transaction.  Speculative stocks The stock of the company that cannot be consistent in the spreading the dividend from one period to another period.The stock that comes from the company that have higher growth revenue. According to Tandelilin (2001:183) stated that there are three kinds of value in stock assessment which are:  Book value The value of the stock that is calculated based on the book keeping company that issued the stock. 2.2. as the leader of the industry that have high reputation. Assessment included determining the value of a stock that is necessary to obtain the performance standards that can be used to assess the benefits in the investment of stock is concerned.

2. Therefore. in 2-for-1 stock split.1 Definition of Stock Split A stock split is a decision by the company’s board of director to increase the number of shares that are outstanding by issuing more shares to current shareholders.3 Stock split 2. The market price indicates how well management duties on behalf of the shareholders. For example.3. it will have 20 million shares outstanding after 2-for-1 split.  Intrinsic value Known also as theoretical value is the value of the stock that is actual or supposed to happen. management is always in control. 18 . According to Horne et all (2001) argued that market prices act as a barometer of business performance. Market value The value of the stock that is shown in the market price on the capital market. A stock split is usually done by companies that have seen their share price increase to levels that are either too high or are beyond the price levels similar companies in their sector. So. if a company had 10 million shares outstanding before the split. The shareholders will be satisfied with the performance of management that can sell their shares and invest the money in order companies. every shareholder with one stock is given an additional share.

Grinblatt .  To bring the information on investment to take the opportunities in the form of improved earnings and cash dividends. Petty .3. but it provides the positive signal to the cash flow of the company in the future. Positive signals from the announcement of a stock split interpret that the manager of the company will deliver a good financial performance prospects that can be considered improve the welfare of investors. even though no economic value. among others (Scott . 19 . Therefore. Martin .According to Jogiyanto (2003:415) stated that stock split it means break a piece of shares becoming n shares.  To restore the price and size of the average trading stock to range tha has been targeted. 1999):  The stock is not too expensive so it can increase the number of shares holder and increase the liquidity of stock trading. 2. there are two types of solution for the shares split those are splitting up ( split up ) and breaking down ( split down / reverse split). Stock split (split up) usually carried out by the company at the price the stock is considered to be too high resulting in the investor 's purchasing power reduced ( Ewijaya in Muniya Alzeta . where the price of the new shares per sheet after the stock split is equal to 1 / n of the previous shares. Keown .2 Types of Stock Split According Erwijaya (1999). stock split done because it expected can give the benefits. Masulis and Titman in Winarso (2005 ) stated that if stock splits . 2008).

it can be concluded various reasons the managers of companies decided to do the stock-split is as following :  To return share price at the optimal trading range which can further add to the attraction of investors to have such shares so as to make the liquid shares to be traded. It can increase the number of shares outstanding.3 The Reason Companies Do Stock Split From the research that has been done by the financial experts to some company managers who do stock split.  Full stock split Full stock split is an additional distribution outstanding shares of 100 % or more of the old number of shares outstanding. Gough. 20 . 2.3.  To view that the company which done the stock split will increase the attractiveness of the investor due to the low price of stocks. Split up is increasing the number of shares circulated by breaking a piece of stock to n shares. ( Jogiyanto . according to NYSE (New York Stock Exchange) which is said by the Mc. that stock split is divided into two kinds. 2000).  Split down is increasing the nominal value per share and reducing the number of shares outstanding. Meanwhile. which are:  Partial stock split Partial stock split is extra the distribution of the outstanding shares of 25% or more but less than 100 % of the number of outstanding shares.

 In the announcement of stock split.  As a step to do merger and acquisition.3. there is a strong signal delivered to the market that management continuously optimistic about the growth of the company and an overview of the power project the company. 2. Rahmat (2009) states.4 Benefits of Stock Split According to Fama (1993) benefits from the actions of stock split by the company are as follows:  Stock prices which are lower provide the wide marketability and efficient markets. The lower stock price will increase the ability of such shares to be traded at all times and will improve the market efficiency.  Shares will attract the small investors and it convert the lot owners of restricted shares (odd lot) becomes the owner of a series of round lot.5 Theory in the Stock Split 21 . “ The benefits of the policy would be obtained if the stock split stock prices are relatively higher before the stock split compared with other companies that are in the similar industry would turn out to be relatively more normal ( not too low or high ) after the stock split” 2.  The number of shareholders will increase.3. which means the addition of market liquidity (relative easier and faster with securities traded at a minimum price which is different from previous transactions). the share price that relatively comparable that would facilitate the negotiation of merger and acquisition that made by the stock exchange.

Harsono (2004) states. also showed the good prospect from the companies in the future. the abnormal returns is the difference between the actual return and that is expected to result from market movements (normal return 22 . According to Jogiyanto (2003) stated that Signalling theory has encouraged companies to do stock split because there is the opportunity to do investment. Leung (2005) defines. Moreover. “Doing the stock split that made the stock price is not high so can be reached by the investors and at the end will increase the liquidity of stock”. There are two theories as the literature to support the stock split which are:  Trading Range Theory This theory said that the high stock price will cause reducing the active trading stock to encourage the companies to do stock split.  Signalling Theory This theory explains that stock split will give the information to the investors about the increasing of significant profit for the future. 2.4 Abnormal Return The component of return that is not the systematic influences (market-wide inf luences). It means the companies do stock split because the price in the market is to high so it encourages the companies to do it. “If the price before stock split is high.According to Michael Hendrawijaya (2009) stated that in the stock split there are several supporting theory that explain about it and it became the prediction that has the relationship with the impact of stock split. so the split of share it proves the truth of motives”. In other words.

which are: 1 Mean – adjusted model Assume the return expectation equal to the average of return realization previously during estimation period. E ( Rit ) = ∑ R it t E(Rit) = Required of return of securities to – i at time t Rit = Actual return securities to – i at time t t = Estimation Period (before period event) 2 Market model To determine market model there are two stages by using data estimation and realization during the period use the model to estimate the expected return in the window period. E ( Rit ) =αi+ βi Rmt + εit of securities to – i at time αi E(Rit) = Required of return estimation t = Intercept. Jogiyanto (2000) states. independent to Rmt 23 . According to Brown and Manner (1985) stated that required of return can be defined by using three models. “Abnormal return or excess return is the excess of return which actually happened to normal return. so abnormal returns (abnormal return) is the difference between the actual return occurred with required of return. It can be formed by using the technique of Ordinary Least Square regression equation. which is the normal returns is the expected return (expected return by investors).).

According to Jones. (1986:375) defined that Trading Volume Activity calculation is done by comparing the number of shares traded in the a given period by the total number of shares outstanding of the company in the same period. the market shown in the bad situation. In this model return securities estimated the same as the market index return.5 Trading Volume Activity Trading Volume Activity (TVA) is considered as a measurement to measure the strength or weakness of the market. Formula to calculate Market Adjusted Model: ARit=Rit −Rmt ARit = Abnormal Return i on day t Rit = Actual return i on day t Rmt = Market return Rmt= ( IHSG)t −(IHSG )t−1 IHSGt −1 2.βi = Slope. systematic risk. Charles P. 24 . dependent to Rmt Rmt = Market return εit = Residual error of securities in the estimation period to t 3 Market adjusted model To estimate the return used the index of market return. When TVA tend to increase while the price has been declined.

SPLITS Empirical Evidence from the Trading Volume Activity One sample T-test There the significant of Trading Volume Activity Nairobi Stock Exchange and there is the positive (Josiah Omollo Aduda. Researcher Research Variables Analysis Data (year) Research Result MARKET REACTION TO STOCK Abnormal Return.et al ( 2005 Abnormal return. dan Chemarum average from Abnormal Caroline 201) Pengaruh stock split: analisis likuiditas Stock split. depth Return and Trading Volume Activity before and after the announcement if stock split 25 . One sample T-test. Paired sample T-test There is the increasing price of stock price in the shares. liquidity. significant difference for Bursa Efek Indonesia dengan growth. trading activity. difference of Abnormal spread. firm size Wilcoxon signed ranks all variables before and test after the announcement memperhatikan pertumbuhan dan ukuran perusahaan Slamet (Lestari dan Eko Arief Sudaryono (2007)) Menendez dan Gomez ( 2003 ) of stock split Earnings . dividends.TVA= the no of shares traded ∈a given period total no of outstanding shares 2. stock Paired sample T-test There is the significant price. Paired Sample T test. Return There is no the saham pada perusahaan go public di trading volume activity.6 Previous Research Review Research Title. institutional optimal trading range ownership after the announcement of stock split Leung.

2. the theoretical basis and the previous study. the research can be drawn in theoretical framework on figure below: Figure Theoretical Framework Phenomenon and Problem Company Announced Stock Split Market Reaction (stock price) Abnormal Return Trading Volume Activity 2.7 Theoretical Framework Based on the background of study.8 Articulating Hypothesis from Theoretical Framework Based on the background and the research objectives. The capital market react toward the announcement of stock split that indicated by the Abnormal Return and Trading Volume Activity 26 . then the hypothesis can be made as follows: 1.

2. Quantitative analysis is the scientific approach to make the decision making. There is the significant difference of Abnormal Return and Trading Volume Activity before and after the announcement of stock split. Population on this research is manufacturing companies listed in Indonesian for the year 2010-2014. The objective of this research is to analyze the value of Abnormal Return and Trading Volume Activity around the announcement of Stock Split.1 Research Method The research method that used by the researcher is the quantitative method. Quantitative method uses the numbers to prove or disapprove a hypothesized relationships and it also provides the connection between empirical observation and mathematical expression of quantitative relationships.2 Sampling Method This research will discuss about the factors that will affect to the company to announce the Stock Split to the market. CHAPTER III DATA PROCESSING METHOD 3. The researcher used the purposive sampling 27 . 3. It generates reliable population and generalizable data to establish causeand-effect relationship that used the statistical approach to obtain the result of the research. The research focused on Manufacture Company which is listed in Indonesian Stock Exchange that announced the Stock Split.

financial statement report that are available in Indonesian Stock Exchange site (www. The objective of this technique is to obtain the adequate information regarding the data that needed by the researcher in order to answer the research problem and to prevent the error that will affect to the result later on. The library research is done by studying a variety of journal. data from the Indonesia Capital Market Directory. 2010 until December 31.com). and other sources of information which are relevant with the topic of this research. 2014 d The companies that have announced the stock split during 2010 until 2014 3. The data that taken from field research such as. It means the companies which have been chosen are selected on the basis of specified criteria. The field research is the data that prepared by the other party or the data that have already available. Data used in this research are yearly Financial Report at the end of each period on 2010 – 2014 of the manufacturing company that have been selected 28 . The criteria that will implied in this research are: a The companies are categorized as a manufacture company b The companies are listed in the Indonesian Stock Exchange for five years from 2010 until 2014 as the research will conducted c The companies have published the Financial Statement Report for the year ended December 31. literature books.idx.3 Research Data The data used in this research is using the secondary data which collected by using the library research and field research. and also yahoo finance site (http://finance.technique.com).yahoo.

The dependent variable (variable dependent) is a variable that is affected or which become due because of the independent variables. Dependent Variables The dependent variable in this study is the average abnormal return and the volume trading activity. The data would be obtained and analyzed by using the statistical analytical tool program which called SPSS (Statistical Product and Service Solution).using the implied criteria.4 Research Variables Research variables used in this study consisted from several independent variables and the dependent variable. 1. and expected return 29 . Variable free (independent variable) is variables suspected to affect or be the cause of a change or the emergence of the dependent variable.1 Definition of Operational Variable No. 3.4. 2. Variable Abnormal Definition the difference Return between the Measurement ARit=Rit −Rmt actual return or return . The dependent variable and the independent variables in this study is as follows: 1. Independent Variables The independent variable was the announcement of stock split 3.

There are two categories of statistic measurements that are used in this research. The phase of the analysis is Descriptive Statistic. Test One Sample t . Expected Return The level of expected profit Rmt= ( IHSG)t −(IHSG )t−1 IHSGt −1 TVA= the no of shares traded ∈a given period total no of outstanding shares investors on investment embedded 3.Test and Paired Sample t – Test. mode. 3. Descriptive statistic is more related with collecting and summarizing data. There are some phases of analysis that will be done in this research. for example standard deviation 30 . along with presentation data.2.1 Descriptive Statistic Descriptive Statistic has it purpose to give description of data in research variable used in this research. median.5 Analysis Data In this research the data that have been collected from library research and field research will be analysed using the statistical method. 1 2 Central Tendency such as mean. along with presentation of data. Normality Test by using Kolmogrov-Smirnov Test.5. Trading Measuring the Volume difference in the Activity number of trades after and before the stock split 3. Dispersion. Those two are usually used in decision making process.

5. In this research the normality test described Testing for normality is expected to be able to determine the tool for the next test used in the study.3.Smirnov Test. the distribution of data can be tested by histogram. by comparing Significance asymptotic with α = 0. normal probity plot or Kolmogorov Smirnov. In order do normality test. multiple linear regressions equation is stated normal if the distribution is normal or at least near normal. Basic drawing conclusions Data is said to be normally distributed if the asymptotic value its significance > 0.2 Normality Test Normality Test is used in order to determine whether the residual value of dependent and independent variable that will be used in multiple regressions equation has a normal distribution or not. Normality Test Data using the Kolmogorov . Normally.2004:2012) 31 .05 (Singgih Santoso.05.

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