Political Connection, Family Ownership, and Stock Performance after IPOs: Evidence from Indonesia (AKRUAL Jurnal Akuntansi)

Summary

• Indonesia led ASEAN countries in IPO volume since 2018, peaking in 2023 with 79 companies conducting IPOs.p.1
• Around 60% of companies listed on the Indonesia Stock Exchange in 2023 were unable to maintain their share prices above the offering price after one year.p.1
• The largest individual net loss among sample companies was recorded by PT Yelooo Integra Datanet Tbk (YELO) at 40 billion rupiah.p.7

Key insights

1. Political connections positively affect post-IPO stock performance across 12, 24, and 36-month periods.p.9
2. Family ownership has no statistically significant effect on post-IPO stock performance.p.9
3. Politically connected IPO firms achieve higher average cumulative abnormal returns than non-connected firms in all observed time horizons.p.8
4. Investors interpret political connections on boards of commissioners or directors as a positive signal of firm stability and privilege.p.10
5. Family ownership fails to act as an effective signal because family businesses are widely prevalent in Indonesia and taken as standard practice.p.10
6. The regression model including political connection and family ownership accounts for an R-squared of 6% in explaining post-IPO stock performance variations.p.9