Tiara Windra Prasti and Wiwiek Dianawati (2020) Market reaction to a firm environmental performance assessment program (PROPER) rank: An Indonesian perspective. International Journal of Innovation, Creativity and Changes, 13 (4). pp. 541-556. ISSN 2201-1315, eISSN: 2201-1323

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Abstract

A Firm’s Environmental Performance Assessment Program (PROPER) has been initiated by the Ministry of Environment program that aims to encourage companies to implement mindful environment management systems. This study aims to analyse the market’s reaction to a public PROPER rank announcement. To test our hypothesis, we used manufacturing firms as our sample base. Those listed on the Indonesian Stock Exchange from 2012 to 2016 were analysed, in a total of 223 firm-year observations. This study used event study methodology. Market reaction was measured by abnormal return and trading volume activity. Our result shows that there is change in market reaction on the PROPER ranks announcement. We also document that there is no significant change in market reaction on firms that have "obedient" compared to "not obedient" levels. This study provides information for company management on implementing a new business strategy to improve its environmental performance.

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