Investigation of Capital Market Efficiency in Indonesia 103 Investigation of Capital Market Efficiency in Indonesia Gita Masria Hutapea 1*10, Ahmad Fauzan Fathoni 2, and Yulia Efni 3 1,2,3 Universitas Riau, Pekanbaru, Indonesia Abstract In the midst of a national economic growth downturn that affected the capital market as a subsystem of the economy, now Indonesia capital market industry began to look at the development of the application of the principles of sharia as an alternative investment instruments in capital markets activities in Indonesia. The growth of the Islamic capital market in Indonesia is quite encouraging, but the Islamic capital market exposure is still minimal. Lack of public understanding about the Islamic capital market into doubt for investors to invest in the capital market. With the background of the problem, this research aims to investigate the level of efficiency increase of capital markets in Indonesia to see the influence of the capital market and the asymmetry of information on abnormal return. The population in this study are all listed company listed on the Stock Exchange 2014-2018 period as many as 626 companies with a total sample of 238 companies were selected based on criteria predetermined. The analytical method used in this research is multiple linear regression and the results showed that the type of capital markets significant negative effect on abnormal returns and the information asymmetry significant positive effect on abnormal returns. The continued development of the Islamic capital market information asymmetry and abnormal returns are also lower so the efficiency of the capital market has also increased. The analytical method used in this research is multiple linear regression and the results showed that the type of capital markets significant negative effect on abnormal returns and the information asymmetry significant positive effect on abnormal returns. The continued development of the Islamic capital market information asymmetry and abnormal returns are also lower so the efficiency of the capital market has also increased. The analytical method used in this research is multiple linear regression and the results showed that the type of capital markets significant negative effect on abnormal returns and the information asymmetry significant positive effect on abnormal returns. The continued development of the Islamic capital market information asymmetry and abnormal returns are also lower so the efficiency of the capital market has also increased. Keywords: Abnormal Return, Principles of Islamic Shariah, The Information Asymmetry, The Type of Capital Markets 1. Introduction The existence of capital market in Indonesia is one of the most important factors in helping to build a strong national economy and global competitiveness with the availability of facilities and the Indonesian capital market instruments that can compete with the capital market instruments other countries. In connection with that, amid the deterioration of national economic growth rate, which also affected the capital market sector as a subsystem of national economy of Indonesia, now the Indonesian capital market industry began to look at the development of the application of the principles of Islamic Shari'a as an alternative investment instruments in capital market activities in Indonesia. * Corresponding author. Email address: hutapeagita16@gmail.com AFEBI Management and Business Review (AMBR) Vol.04 No.02, December 2019 104 Research conducted by Ngo & Wijayanti (2003) concluded that that invest in Islamic stocks more profitable than investing in shares of non-Islamic. Ocean et al (2016) concluded that the Islamic stock index in the Indonesia Stock Exchange is an efficient capital market in the form of a strong half. Research conducted by Khajar (2012) found that the Indonesian Islamic capital market is efficient at least in the form of weak. Study conducted by Nasution (2015) showed that the Islamic capital market has been in a semi-strong efficient. Research on the conventional capital market conducted by Mar'ati (2012) concluded that that the Indonesian capital market efficiency theory for semi-strong form (semi-strong form) has been efficient. Dwipayana & Wiksuana (2017) concluded that the Indonesia Stock Exchange, represented by compass 100 index is expressed in a semi-strong efficient in information (informationnaly efficient market). Research on the comparative efficiency of Islamic capital markets and capital markets conventionally performed by Ali et al. (2018) using MF-DFA analysis concludes that the Islamic capital market is more efficient than the conventional capital market. Research Mensi et al (2016) on the efficiency of the Islamic capital market after the GFC using MF-DFA analysis shows that the Islamic capital market more efficient in the long run than in the short term. Despite the growth of the Islamic capital market is quite encouraging, but the Islamic capital market exposure is still minimal. Lack of public understanding about the Islamic capital market into doubt for investors to invest in the capital market. This is because the practice of activity in the capital market that contain the element of speculation. Therefore, requires knowledge of the Islamic capital market, both of concepts and principles, as well as trade mechanisms. With the background of the problem, This study aimed to investigate the level of efficiency increase of capital markets in Indonesia to see the influence of the capital market and the asymmetry of information on abnormal return Based on the data that has been analyzed, the type of capital markets significant negative effect on abnormal returns and the information asymmetry significant positive effect on abnormal returns. This suggests that the development of the Islamic capital market information asymmetry and the lower abnormal returns so that the efficiency of the capital market has also increased. Furthermore, the explanation in this article will be divided into three parts, the first is a literature review that will explain any theory used in this study and previous research that referenced researcher. The second part is the results and discussion will explain the results of research and discussion of results have been found. Then, the third part is the conclusion that a more concise outline of the research study. 2. Literature Study/Hypothesis Development Information Asymmetry Theory This theory says that the parties associated with the company do not have the same information about the prospects and risks of the company. Certain parties have more information than others. This theory consists of theories: 1. Myers and Majluf According to this theory there is information asymmetry between managers and outsiders. The manager has more complete information about the condition of the company than outsiders. 2. Signaling Signaling develops a model in which the capital structure (the use of debt) is a signal delivered by managers to the market. If the manager has confidence that the company's prospects are good, and therefore wants the shares to increase, he wants to communicate this to investors. Managers can use more debt as a more credible signal. Investigation of Capital Market Efficiency in Indonesia 105 Islamic Capital Market Concept The principles of Islamic capital market instruments differ from conventional capital markets. Shares traded on the Islamic capital market must come from issuers that meet the Islamic criteria The Sharia capital market must be free from unethical and moral transactions, such as insider trading and short selling. Therefore, the Islamic capital market must throw away any transactions that contain elements of speculation. This is what distinguishes it from conventional capital markets which is one way to get its benefits by using speculation. (Sholahuddin, 2006). Effect of Capital Market Types on Abnormal Returns The concept of an efficient market places more emphasis on aspects of information where the price of traded securities has reflected all available information (Tandelilin, 2010). Based on this concept, efficient markets are always associated with the availability of information which means there is no asymmetric information among stakeholders. According to the asymmetry theory, there is an imbalance of information between stakeholders relating to the prospects and risks of companies where certain parties have better information than outside parties (Hanafi, 2014). More information that is owned by the manager can trigger to take actions in accordance with the wishes and interests to maximize the utility for himself. Conceptually, the Islamic capital market is designed to reduce asymmetric information. This is supported by Sutedi's research (2011) which states that the existence of Islamic capital market rules aims to minimize and even eliminate speculation in stock trading, where in conventional capital markets speculation is a very difficult situation to separate. In accordance with the concept, the Islamic capital market should be more efficient compared to conventional capital markets. The efficiency referred to here means that no investor can get an abnormal return in stock trading. Based on the description above, the research hypothesis can be formulated as follows. H1: Suspected type of capital market affects abnormal returns. Effect of Information Asymmetry on Abnormal Return An efficient capital market is needed to eliminate speculative actions because all information is the basis of investors in making investment decisions. The impact of an efficient market is that no investor can control the market. With the efficiency of the capital market, it means that no one can get an abnormal return. In addition, if the market is efficient, there is no asymmetric information. Information asymmetry is a condition where there is an imbalance of information between management and shareholders (Irfan, 2002). According Jogiyanto (2013) information asymmetry is private information that is only owned by investors who have information (informed investors). Information asymmetry indicates that there is a group of investors who have more information about an event that allows investors to get abnormal returns. The higher the information asymmetry, the higher the likelihood that investors will get an abnormal return which results in an inefficient market. H2: Alleged information asymmetry affects abnormal returns. 3. Research Methods The population in this study are all listed company listed on the Stock Exchange 2014-2018 period as many as 626 companies. The sampling technique that has been chosen is purposive sampling method with a total sample of 238. The analysis method used in this research is multiple linear regression AFEBI Management and Business Review (AMBR) Vol.04 No.02, December 2019 106 Data used in this research is secondary data. Secondary data sources in this study was obtained from the Indonesia Stock Exchange through the sitewww.idx.co.id, www.investing.comand www.yahoofinance.com, Operational Definition and Measurement of VariablesAbnormal Return According Husnan (2009) abnormal return is the difference between the actual profit rate to the level of the expected profit. According Jogiyanto (2013) return is not normal (abnormal return) is the difference between actual returns that occurred with the return expectations. The formula to calculate the abnormal return by Jogiyanto (2013), namely: RTNi, t = Ri, t - E [Ri, t] (1) Type Capital Markets Type capital market is divided into two, namely the Islamic capital market and conventional capital markets.General differences between conventional capital market with the Islamic capital market can be seen in the instruments and mechanisms of the transaction, while the Islamic stock index value difference with conventional stock index value lies in the issuer's shares of criteria that must meet the fundamental principles of sharia. In this study, the Islamic capital market rated 1 and the conventional capital market by value 0. Asymmetry of Information Asymmetry of information is a condition where there is an imbalance between the management information acquisition as a provider of information to the shareholders and stakeholders as the user information (Irfan, 2002). Asymmetry information can be measured by using the bid ask spread. Bid ask spread can be measured by the following formula: SPREADi, t = (𝑎𝑠𝑘𝑖,𝑡 − 𝑏𝑖𝑑𝑖,𝑡 {(𝑎𝑠𝑘𝑖,𝑡+ 𝑏𝑖𝑑𝑖𝑡 )/2} x100 (2) 4. Results Descriptive Statistics Analysis A description of the variables of this study are presented in Table descriptive statistics which show the minimum, maximum, mean, and standard deviation can be seen in this betikut table. Table 1 Descriptive Statistics Test Results ISSI VS JCI descriptive Statistics N Minimum Maximum mean Std. deviation Type Capital Markets 276 891 0 1 .96 .195 Information asymmetry 276 891 .000 39 316 3.4160 9 3.269144 abnormal Return 276 891 -3131 3,843 -.05229 .965581 Source: Data processed (2019) Source: Data processed (2019) Table 2 Test Results Descriptive Statistics JII VS LQ45 descriptive Statistics N Minimum Maximum mean Std. deviation type capital market 42 596 0 1 .38 .484 Information asymmetry 42 596 .132 27 435 2.72883 1.665304 abnormal Return 42 596 -9270 15 364 .00748 2.915783 http://www.idx.co.id/ http://www.investing.com/ http://www.yahoofinance.com/ Investigation of Capital Market Efficiency in Indonesia 107 Classical Assumption Test Results Normality test The test results normality of the data in this study can be seen in Table 3 and 4 below. Table 3 Normality Test Results ISSI VS JCI Table 4 Normality Test Results JII VS LQ45 Based on the tables 3 and 4 above shows the value Asimp. Sig. Using data ISSI JCI VS 0.063> 0.05. Furthermore, using the data JII LQ45 VS 0.072> 0.05. These results indicate that the regression model to meet the normal assumptions. Test Multicollinearity The test results multicollinearity in this study are presented in Table 5 and 6 below. Table 5 Test Results Multicollinearity ISSI VS JCI Coefficients Model collinearity Statistics Tolerance VIF 1 (Constant) Type Capital Markets .992 1,008 Information asymmetry .992 1,008 a. Dependent Variable: Abnormal_Return Source: Data processed (2019) One-Sample Kolmogorov-Smirnov Test Residual unstandardized N 276 891 Normal Parametersa, b Mean .0000000 Std. Deviation .76003491 Most Extreme Differences Absolute .406 Positive .040 Negative -.046 Kolmogorov-Smirnov Z .046 Asymp. Sig. (2-tailed) .063C a. Test distribution is Normal. b. Calculated from data. Source: Data processed (2019) One-Sample Kolmogorov-Smirnov Test Residual unstandardized N 42 596 Normal Parametersa, b Mean .0000000 Std. Deviation 2.18187630 Most Extreme Differences Absolute .105 Positive .086 Negative -.105 Kolmogorov-Smirnov Z .105 Asymp. Sig. (2-tailed) .072C a. Test distribution is Normal. b. Calculated from data. Source: Data processed (2019) AFEBI Management and Business Review (AMBR) Vol.04 No.02, December 2019 108 Table 6 Test Results Multicollinearity ISSI VS JCI Coefficients Model collinearity Statistics Tolerance VIF 1 (Constant) Type Capital Markets .999 1,001 Information asymmetry .999 1,001 a. Dependent Variable: Abnormal_Return Source: Data processed (2019) Based on the results in Table 5 and 6 above can be seen that the four variables independem have tolerance values> 0.10 and VIF <10, so that it can be concluded that the regression model is free of multicollinearity. Test Heteroskidastity Heteroskidastity testing results in this study are presented in Table 7 and 8 below. Table 7 Test Results Heteroskedasticity ISSI VS JCI Coefficients Model T Sig. 1 (Constant) Type Capital Markets .231 .641 Information asymmetry .759 .789 a. Dependent Variable: Res_2 Source: Data processed (2019) According to the table 7 can be seen that the Sig. for variable types of capital market amounted to 0,641> 0,05 and the information asymmetry 0.789> 0.05, so it can not happen heteroskedastisity concluded in this study. Table 8 Test Results heterocedastisity JII VS LQ45 Coefficients Model T Sig. 1 (Constant) Type Capital Markets -.324 .774 Information asymmetry .652 .889 a. Dependent Variable: Res_2 Source: Data processed (2019) Based on table 8 above it can be seen that the Sig. for variable types of capital market amounted to 0.774> 0.05 and the information asymmetry 0.889> 0.05, so it can not happen heteroskedastisity concluded in this study. Autocorrelation Test Autocorrelation test results of this research can be seen in table 9 and 10 below: Investigation of Capital Market Efficiency in Indonesia 109 Table 9 Test Results autocorrelation ISSI VS JCI Model Summary Model R R Square Adjusted R Square Std. Error of the Estimate Durbin-Watson 1 .617a .380 .380 .760038 .366 a. Predictors: (Constant), Asimetri_Informasi, Jenis_Pasar_Modal b. Dependent Variable: Abnormal_Return Source: Data processed (2019) According to the table 9 the value of Durbin Watson (DW) produced a regression model that is equal to 0.366 while for the table DW with sampael N = 276 891 and a variable indevendennya (k) = 2 values obtained dL = 0.181 and dU = 0.223. Thus dU