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Analysis of Earnings Per Share Before and After Ipo and the Strategy (Case Study: Companies Perform Ipo in Indonesia Stock Exchange Year 2013)

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Analysis of Earnings Per Share Before and After Ipo and the Strategy (Case Study: Companies Perform Ipo in Indonesia Stock Exchange Year 2013) Proceeding of 9th International Seminar on Industrial Engineering and Management ISSN : 1978-774X ANALYSIS OF EARNINGS PER SHARE BEFORE AND AFTER IPO AND THE STRATEGY (CASE STUDY: COMPANIES PERFORM IPO IN INDONESIA STOCK EXCHANGE YEAR 2013) 1 2 3 Dewa Ayu Jessica Putri , Endang Chumaidiyah , Rita Zulbetti . 1, 2, 3 Faculty of Industrial Engineering, Telkom University, Bandung 40257, Indonesia [email protected], [email protected], [email protected] ABSTRACT This study aims to identify differences value of EPS before and after the IPO in companies listed on IDX in 2013. Data collection methods used in this research is literature study through secondary data in the form of a company’s financial statement and annual report. Based on research about differences value analysis of EPS, the financial sector has significantly different value of EPS before and after the IPO. Next, PT Bank Mestika Dharma Tbk with biggest total assets among the financial industry is chosen for the representative company SWOT analysis. By describing the strengths, weaknesses, opportunities, threats, and mapping the competitive position, then formulating strategies based on SWOT analysis and portfolio in selected companies from the sectors that have EPS performance test differences. This type of research used in this research is descriptive qualitative where using the priority weighting calculation for the internal and external factors by using AHP method expert judgment regards to analyse with SWOT. Meanwhile the SWOT matrix and Internal-External analysis result, it concluded that the company is in grow-and-stability quadrant. Refers to the study, the alternative strategy is horizontal integration, as well as product development. Key words: Earnings Per Share, IPO, AHP Method, SWOT, Strategy 1. INTRODUCTION growth and expansion of the businesses. Initial Public Offering will change the status of The capital market has very important the company from private to be public role in the economy representative of a corporate and make consequences to country, because the capital markets runs the responsible on the management to improve economic functioning as well as financial its performance. functions. Based on the economic point of Currently Indonesia's economy has view, the stock market serves an efficient shown a good significant progress, it can be mobility system to long-term funds for the seen from many companies that is going government. Through the capital markets the public. It means that people began to government can allocate public funds into cultivate an open economy and ready to be productive investment sectors. From the more competitive. A clear indicator is the financial perspective, the stock market increasing performance of a stock exchange provides an efficient medium to allocate that functioning as a mediator or intermediary funds from those who have surplus funds, in the trading of shares, in this case is the which are investors, and those who need shares which are listed on the stock funds, which are companies. exchange. Encouragement of funding needs became Companies that have become public and one of the main reasons that a company have registered their name on Indonesia willing to become a public company by selling Stock Exchange (IDX) will be easier to obtain shares in the capital market. IPO is a funds rather than had to borrow funds from company's offering for the first time and held other parties. The investors will be interested in the primary market, then the shares will be to invest funds if they see company in a good traded in the secondary market. Fulfilling the state, has ability to produce profits, the company's funding is as a consequence of company's future prospects, as well as the Analysis of Earning Per Share Putri 1 Proceeding of 9th International Seminar on Industrial Engineering and Management ISSN : 1978-774X rate of return given by the company as a investors will examine whether the company profitable enterprise for them. The higher the is profitable for them or not, because it profits produced by the company, the higher describes the amounts of money that is the rate of return provided to investors that obtained for each share of common stock and expected, so that maximizing earnings describes the prospect for company’s became the main focus for investors. earnings, especially in the future (Tjiptono and Hendry, 2001). Earnings per share (EPS) can indicate the level of prosperity or well- being of a company. When the earnings per share (EPS) are distributed to the investors is in high number, it indicates that the company can provide a good level of welfare for its shareholders, and vice versa. The reasons for selecting this study is because the earnings per share (EPS) Figure 1. Number of Companies Perform reflects the performance of the company, IPO in Indonesia from the value of the EPS that need to be In the process of selling shares, the taken before and after the IPO, it can be seen financial statements have an important whether the company has a good function to the owner of the company (issuer), performance or not related after the IPO. underwriters, and investors. It is important However, based on several studies relating to because it is one of the main source of the company's financial performance prior the information for assessing the pricing in IPO IPO and post IPO, it turns out to conclude process. On investor point of view, it is a different outcomes. source of information in determining Ritter (1994), documented that the investment decisions. This financial earnings per share of companies going public information can be found in the prospectus typically grows rapidly in the years prior to provided by the company which is also going public, but then actually declines in the contains non-financial information first few years after IPO. Else Hsun and Tzu (Sulistyanto and Wibisono, 2003). The (2003) concluded that the result of information in the prospectus required by performance in Chinese IPOs with sample of investors in the decision-making process on 884 companies listing in mid-1995 to mid- the exchange (Kim and Ritter, 1999). 1999 period is that earnings per share and Performance’s assessment of the Return on Equity has no significant change company before and after becoming a public after IPO. Hsun and Tzu (2003) even said company is very important. The company's that IPO is of little obvious help to companies’ performance especially in the form of operational performance because of the financial statements required to be reported financial indicators tend to fall rapidly year on periodically as a form of full disclosure year. Consistent to Hsun and Tzu study, function of being public company. Wang (2005) also had conclusion on his Assessment’s criteria for the company's research that operating performance of operating implementation results is varied. Chinese listed companies 3 years after IPO One of them is earnings per share (EPS) is nearly one-third lower than 3 years prior to value as an important indicator of the IPO. management's achievement in satisfying Purba (2006) also said on his research company’s shareholders in the form of rate of that profitability ratio, liquidity ratio, and stock return in the period before and after the IPO. performance after IPO is decrease, whereas According to Prastowo and Juliaty (2008) the solvability ratio is increase on his study in earnings per share (EPS) is the amount of PT. X. Added by Pastusiak (2016), the study profit that become the rights to shareholder performed profitability analysis such as ROE, on one sheet of ordinary shares. Earnings per ROA, NPM, and OPM ratio in companies share (EPS) is the first important component before and after IPO. The result is that that must be considered in analysing profitability of companies in a year before IPO company. By looking at the firm’s EPS value, id better than one year after IPO. Jain and Analysis of Earning Per Share Putri 2 Proceeding of 9th International Seminar on Industrial Engineering and Management ISSN : 1978-774X Kini (1994), who said that overall of Malaysia analysis, is in form of recommendations and IPOs in 1990 to 2000 period, there is strategy improvement. declining performance in the IPO year and up EPS value of companies who to three years after IPO. The year-to-year perform IPO in 2013 analysis reveals that the greatest declining performance is in the year immediately following the IPO. EPS before IPO EPS after IPO In Kenya, study by Kuria (2014) shows Paired Sample T-Test that companies listed in Kenya, over the six years period extended from prior and post Analysis EPS before and after IPO financial performance levels have IPO declined based on several performance measures. Wamari (2014) also supported on EPS performance her study which has shown that the overall analysis stock performance in the long run after going public in underperform in terms of trend AHP Questionnaires AHP Questionnaires analysis but not significantly. On the other hand, Kinyua (2013) studied the effects of Internal Factors External Factors initial public offering on 56 listed companies’ performance in Nairobi Stock Exchange Priority Weight Priority Weight conclude that profitability ratio and earnings per share ratio rose after IPO. SWOT Analysis If the financial ratios can be used as predictors of EPS, then these findings Result constitute sufficient useful knowledge for Strategy users of financial statements and all Improvement stakeholders. Conversely, if the financial ratios is not enough to affect the EPS, the results of this research will strengthen the Recommendation evidence of inconsistency previous empirical findings. Figure 2. Conceptual Model The data collection phase conducted to 2. CONCEPTUAL MODEL obtain the information needed in order to achieve the research objectives. In this study, The conceptual model contains the the authors use secondary data and primary concept of workflow and flow variables used data.
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