Leadership Change and Stock Market Response: An Event Study of Indonesia’s Ministerial Transition in 2025
DOI:
https://doi.org/10.5281/zenodo.17571239Keywords:
Event Study, Abnormal Return, Political Appointment, Jakarta Composite Index (JCI), Market Reaction, Investor Sentiment.Abstract
This study examines the market reaction to the appointment of Purbaya as Indonesia’s economic minister, focusing on the abnormal return (AR) behaviour of the Jakarta Composite Index (JCI) during the 30-day event window, consisting of 15 days before and 15 days after the inauguration. Using the event study method, daily market returns were compared against expected returns estimated through the market model. The results show that, before the event, the average abnormal return (AAR) and cumulative average abnormal return (CAAR) were close to zero, indicating a neutral market response. However, after the inauguration, both AAR and CAAR turned positive, indicating an increase in investor confidence and favourable market sentiment. These findings highlight the market’s sensitivity to political-economic leadership transitions and provide evidence that credible appointments can positively influence investor perceptions in emerging markets, such as Indonesia.
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