THE EFFECT OF DEFAULT RISK AND UNEXPECTED EARNING ON CUMULATIVE ABNORMAL RETURN OF INDONESIAN REAL ESTATE COMPANIES

Abstract

This paper examines whether Default Risk and Unexpected Earning have any effect on
Cumulative Abnormal Return using the control variables of beta, growth, and size and
variable interaction between Unexpected Earning with Default Risk, Beta, Growth, Size. The
research sample includes 21 real estate companies listed in Indonesian Stock Exchange
within the period of 2011-2016. Reverse regression method was used. The results show that
Unexpected Earnings, growth and size effect have a significant effect on Cumulative
Abnormal Return. All interaction variables have a significant effect on Cumulative Abnormal
Return. Higher Unexpected Earning means higher profit quality and higher investors trust,
which then will contribute to higher Cumulative Abnormal Return. Further, growth and size
contribute to higher Cumulative Abnormal Return because the longer companies operate, the
bigger their growth in terms of revenues and total assets.