Right Issue: The Impact to Abnormal Return, Share Liquidity and Company’s Financial Performance (Empirical Study at Companies listed at Indonesia Stock Exchange)

Objective – The increasing number of companies listed at Indonesia Stock Exchange showed that there are positive growth of capital market in Indonesia. To be sustain in the market, companies need to improve their competitive advantage by optimizing resource utilization such as financial resources. One of the corporate action to raise the capital is the right issue. The aim of this research is to analyze the difference of abnormal returns, shares liquidity proxied by trading volume activity and company's financial performance proxied by current ratio and price earnings ratio before and after the rights issue. Samples were taken by purposive sampling. Methodology/Technique – Number of samples are 26 companies listed at Indonesia Stock Exchange that take the right issue for the year 2006 -2012. Testing of the hypothesis was done by using paired sample t-test for normally distributed data and Wilcoxon signed rank test for data that are not normally distributed. Findings – The results of this study showed that there are significant difference in share liquidity proxied by trading volume activity before and after the announcement of the rights issue. Novelty – After the right issue there are decreasing number of trading volume activity because shareholders prefer to maintain their proportion of share capital. Type of Paper: Empirical