Political Tension and Market Anxiety
The reshuffle did not happen in isolation. Throughout 2025, Indonesia experienced widespread social unrest marked by student-led demonstrations and nationwide protests over living costs, public spending priorities, and legislative privileges. These tensions weighed heavily on investor sentiment.
In late August 2025, the Jakarta Composite Index (JCI) fell more than two percent in a single day, while Bank Indonesia reported cumulative foreign capital outflows exceeding IDR 138 trillion since the start of the year. The pressure culminated in President Prabowo Subianto’s decision to overhaul the cabinet, including removing the sitting finance minister.
How the Research Was Conducted
To measure market reactions, Moksa and Manullang used a quantitative event study approach, a standard method for identifying whether a specific event carries information that affects stock prices.
The researchers examined:
- 45 LQ45 stocks, representing the most liquid and actively traded companies on the Indonesia Stock Exchange.
- An 11-day observation window, covering five trading days before the reshuffle, the announcement day itself, and five trading days afterward.
- Daily stock price data sourced from official Indonesia Stock Exchange records.
Key Findings: Immediate Shock, Gradual Adjustment
The results reveal a clear and structured pattern in investor responses.
Before the reshuffle, stock returns were already under pressure. This suggests that investors anticipated political changes amid mounting protests and policy uncertainty.
On the announcement day, the market reaction turned sharply negative. Many LQ45 stocks recorded returns well below normal levels, signaling a strong short-term loss of confidence. Investors appeared to interpret the removal of a well-established finance minister as an increase in fiscal and policy risk.
In the days that followed, however, the market began to stabilize. As Purbaya Yudhi Sadewa communicated his commitment to fiscal sustainability, economic growth targets, and banking sector support, abnormal returns started to recover.
Implications for Policy, Business, and Investors
The study carries important lessons beyond academic debate.
For policymakers, it underscores the need for clear and credible communication when making high-stakes cabinet decisions. Markets react not only to the decision itself but also to the perceived continuity and competence of incoming leaders.
For business leaders and investors, the findings reinforce the importance of monitoring political developments as part of financial risk management. Changes in economic leadership can influence asset values within days, even hours.
For Indonesia’s financial system, the results suggest a growing level of informational efficiency. Despite volatility, the market demonstrates the ability to process complex political signals and move toward a new equilibrium once uncertainty begins to resolve.
Author Profiles
Shinju Valentino Moksa, S.E. is a researcher in management and capital market studies at Universitas Mahkota Tricom Unggul.
His work focuses on financial markets and investor behavior in emerging economies.
Yosua Parhorasan Manullang, S.E., M.M. is a lecturer and researcher at Universitas Mahkota Tricom Unggul,
Specializing in finance, investment analysis, and market efficiency.
Source
Shinju Valentino Moksa, Yosua Parhorasan Manullang “Minister of Finance Reshuffle and the Purbaya Effect: A Reflection of Market Confidence and Indonesia’s Economic Stability through an Event Study Approach”, Asian Journal of Management Analytics (AJMA), Vol. 5 No. 1, hlm. 57-72. 2026
DOI: https://doi.org/10.55927/ajma.v5i1.15965
URL Resmi: https://journal.formosapublisher.org/index.php/ajma
.png)
0 Komentar