The Effect of Subscription Discounted Price Moderated by CSR Investment on the Right Issue Performance: Evidence from Banking Companies in Indonesia Alya Ridha Aisy
School of Business and Management, Bandung Institute of Technology, Jalan Ganesha 10, Bandung 40132, Indonesia.
alya_ridha[at]sbm-itb.ac.id
Abstract
Many banking firms executed right issues in order to expand their business or meet the minimum core capital requirements. Among those, Bank Rakyat Indonesia (BRI) achieved a record as the largest rights issue in the Southeast Asia region. With a discount of 2.5% from their average market price, this right issue saw an oversubscription of 1.35%. According to prior research, financial managers have long recognized that subscription discount prices (DISC) positively affect the success of the right issue. If the subscription price is set above the stocks price, rational stockholders will not subscribe because they would rather buy shares in the market at a lower price. However, in BRI case, their involvement and concern for the community development and sustainability may be another factor affecting the success of a rights issue. This argument may be true since previous research has shown that investors are increasingly considering non-financial information, of which corporate social responsibility (CSR) is a key component. Reflecting on this, the author was intrigued in testing out the moderating effect of a company engagement in CSR on the relationship between DISC and the performance of a right issue, to know whether increased CSR investment increases the likelihood of a successful right issue or if it only happens in the BRI case. This study takes a quantitative approach, collecting secondary data with a purposive sampling. The total sample of 53 bank rights issues in Indonesia was analyzed on SPSS using a moderating binary logistic regression model. The findings suggest that DISC and firms age significantly positively affect the success of right offerings. Also, DISC and ROA significantly positively affect the abnormal returns while the firms size affects negatively. However, CSR Investment as the moderator did not have any significant effect on the right issue performance.
Keywords: Right issue performance- Subscription price- CSR investment- Banks
