Abstract :
The information of the right issue announcement had resulted in the stock
market to react negatively which is reflected in the decreasing of the stock
price/return and the increasing trading activity around the announcement day. The
objective of this research is to verify empirically that the behavior of stock prices and
trading activity differ around the issue day of right issue.
This paper examines four companies in financial industry (banking sector)
which announced right issue in Indonesia Stock Exchange during 2005 until 2007.
The stock price is used to estimate the stock return. The research utilized trading
volume activity (TVA) to test the difference in trading activity around the issue day of
stock offering (right issue).
Overall, the result of this research indicate that there are difference of the
stock return around the period before the five right announcement and around the
five day after right announcement. And also for the trading volume activity, there are
difference between trading volume activity around five day before right
announcement and five day period after right announcement. Keywords: Right Issue, Stock Price, Stock Return, Trading Volume Activity.