Market Reactions to Merger and Acquisition Announcements: Evidence from IDX80 and Non-IDX80 Firms in Indonesia

This study investigates the market reaction to merger and acquisition (M&A) announcements by comparing abnormal returns and stock trading volume activity of acquirer companies listed and not listed in the IDX80 stocks index from 2018 to 2024. Using an event study methodology, the research applies the Kolmogorov-Smirnov test for normality and paired samples t-tests to analyze stock price reactions before and after the announcements. The findings reveal that M&A announcements do not significantly affect abnormal returns for both IDX80 and non-IDX80 companies, indicating that investors tend to respond conservatively unless supported by clear strategic synergies. However, trading volume activity significantly increased for IDX80 companies’ post-announcement, reflecting heightened investor attention, while non-IDX80 companies showed no statistically significant change. These findings suggest that investor responses in Indonesia’s capital market remain cautious, particularly for firms with low liquidity and visibility. The study contributes to the literature on the efficient-market hypothesis (EMH) and signaling theory in emerging markets and recommends that investors should not rely solely on signals from corporate actions but also consider comprehensive fundamental analysis when making investment decisions. Future research is encouraged to explore additional factors such as acquisition type, industry classification, and company fundamentals to gain deeper insights into market behavior.