Name: Hanis Shahirah Mohd Khairi

Matric No.:46928
Title: Stock market efficiency and liquidity: The Indonesia

Stock Exchange merger

Author: Ann Shawing Yang, Airin Pangastuti
Journal: Research in International Business and Finance
Volume/Issue/ Page (s): Vol 36/pp. 2840
Year:2016
Badan Pengawas Pasar Modal (Capital Market Executive Agency or BAPEPAM) proposed a
5-year master plan which initiated the merger between SSX and JSX on December 27, 2005.
SSX founded in June 1989 operating in Surabaya. SSX was privately owned organization to
operate in the bonds market and regional stock listings for Surabaya-based firms. JSX founded
in December 1991 and owned by a private organization that took over the operations from
BAPEPAM to separate the functions of regulation and daily operations of the stock
exchange.On September 11, 2007, a merger announcement that declared SSX to be part of
JSX was released. Soon, there was official merger held on November 30, 2007. A general
meeting for both exchanges stockholders was held on October 30, 2007 as to confirm the
official merger date resulting in SSX terminated its operations with all listed companies and
merged into JSX, which was renamed as IDX.
Primary reasons to engage in merger and acquisition of stock exchanges is to achieve
economies of scale and scope which both aim to increase market efficiency and
performance(liquidity). In order to increase trading volume, market share, and stock prices,
merger and acquisition is believed to be the best way. Stock exchange mergers play a role in
increasing trading volume while reducing transaction costs to improve liquidity. Stock
exchanges also to provide financial intermediary services and products, therefore, an increase
in stock exchange members through integration could cut the cost of stock exchange operation
to acquire greater liquidity and trading volume

This research attempts to investigate the market liquidity and efficiency of the merger between the Surabaya Stock Exchange
and the Jakarta Stock Exchange into the Indonesia Stock Exchange (IDX), to compare the IDX composite index and the LQ45
index market efficiency levels according to market capitalization, industry sector, and indices as well as to propose appropriate
managerial strategies for improving the market efficiency of stock exchanges. Few hypotheses developed such as Hypothesis 1;
Stock market merger activities increase market liquidity to improve market performance, Hypothesis 2; Larger capitalization firms
benefit more from stock market mergers than smaller firms, for greater liquidity and efficiency,Hypothesis 3; Stock market merger
activities increase market efficiency to improve market performance, Hypothesis 4a; Large market capitalization firms with
foreign ownership reduce stock market efficiency and liquidity, Hypothesis 4b; Small market capitalization firms with foreign
ownership increase stock market efficiency and liquidity

Critique/ Comments:
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Support by 2 other journal articles