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.