Stock price reaction to the announcement of "Raising ownership ratios of foreign strategic partners in local banks" : Evidence from VN-30

Abstract

In January 1st, 2014, the government issued a new decree relating to foreign ownership. This new announcement gave hope for both domestic and foreign investors because the government decided to raise the foreign ownership ratio for banks and credit unions. This research is conducted with the purpose of testing how stock’s prices in Vietnam stock market react to this new announcement and whether there is existence of abnormal returns in the surrounding period of the announcement date. This research applies event study as the main methodology for conducting the test because it is the most suitable and appropriate method for this kinds of study. With the estimation period of about 100 days, the research continues to test the stock’s prices reaction in the range of day -10 through day +10. Moreover, 30 companies from VN-30 are chosen to help conduct the test. Also, the VN-index is chosen to be standard to compute the total standardized abnormal returns and cumulative total standardized abnormal returns. After calculating both variables and computing their p-values, the result indicates that there is no significance of these values. Therefore, this research concludes that there is no impact of the changing foreign ownership announcement over the stock’s prices of the chosen firms.