Islamic Bank Merger and Economic Crisis: Event Study Analysis

Abstract

This event study examines the stock price reaction to the merger announcement of three major Islamic banks in Indonesia, namely BNIS, BRIS, and BSM to become Indonesia Islamic Bank (ticker code BRIS). This study analyzes whether there is an abnormal return around the merger announcement on 14 days window period. Using a daily stock price of BRIS, market index, and trading volume we calculated abnormal return and risk using market model Sharpe's single index model. Analysis of the 14 days window period found that there is an insignificant abnormal return before and after the Islamic banking merger and Indonesia Stock Exchange has been categorized as weak-form efficiency. The results of statistical tests reveal that stock returns and trading volume react positively after the merger announcement and are significant at 5% alpha.