Analysis of Tobacco Control With Semi-Strong Market Theory for
Forecasting in the Future
Novi Putri Diantari
Faculty of Public Health, Universitas Airlangga, Mulyorejo, Surabaya, Indonesia
Keywords: Control, Tobacco, Theory, Semistrong.
Abstract: Tobacco control policies are analysed as information that gives a signal to the market, particularly those
with close affiliations to the tobacco industry. The existence of the cigarette industry has increasingly
become a dilemma. It is undeniable that the tobacco industry has consistently contributed a substantial
portion to the Indonesian State Budget from year to year, around Rp 40 trillion for 2007, coupled with the
absorption of a lot of labour. However, the fact that tobacco products are harmful and have a negative
impact on health, being the cause of 5 million deaths per year, makes the world unable to turn a blind eye.
Responding to the problem, the WHO in 1999 initiated the Framework Convention of Tobacco Control
(FCTC), which is an international agreement on the regulation and control of tobacco for its member
countries. However, Indonesia is one of the largest cigarette producing and consuming countries in the
world. The purpose in this study is to prove the theory of the semistrong efficient market where securities
and prices reflect the relevant content of the information that is available.
1 INTRODUCTION
The economic and social costs incurred by tobacco
consumption continue to increase and this burden is
largely borne by the poor. In Indonesia, cigarette
consumption in 2008 reached 240 billion cigarettes
or about 658 million cigarettes per day. This
indicates money around Rp 330 billion burned or
spent to consume cigarettes in Indonesia in a day.
According to WHO data, Indonesia is the third
country with the largest number of smokers in the
world after China and India. The increased
consumption of cigarettes has an impact on the
higher burden of smoking diseases and increased
mortality from smoking.
The existence of advertising, promotion and
sponsorship of cigarettes has triggered a dramatic
rise in the number of child and adolescent smokers.
The cigarette industry in Indonesia has almost full
freedom of promoting its products in various ways.
This is very contrary to other countries that actually
protect children from the dangers of smoking
(TCSC-IAKMI).
The smoking prevalence in Indonesia is very
high in all walks of life, especially in men ranging
all the way from children, through adolescents to
adults. The trend of smoking continues to increase
from year to year. This condition is very worrying.
The National Socio-Economic Survey (Susenas) and
Riskesdas data shows that the smoking prevalence
for all age groups is experiencing a surge. Based on
the Susenas data from 1995, 2001 and 2004 and the
Riskesdas data for 2007 and 2010, the prevalence of
smokers is 16 times higher in men (65.8%) than in
women (4.2%). Nearly 80% of smokers start
smoking before their age has reached 19 years.
Generally people start smoking when young and do
not know the risks regarding the addictive hazards of
cigarettes. The consumer's decision to buy cigarettes
is based on a lack of sufficient information about the
risks of purchased products, the addictive effects and
the impact of their purchases being charged to
others.
The addictive behaviour of smoking in Indonesia
is similar to drinking alcohol in Indonesia.
According to foreign sources, the industrial stocks of
alcohol and tobacco are opposed to ethically and
socially responsible investments. The issues to do
with corporate ethics, and in particular the health
aspects of the sector, are still frequently debated.
330
Diantari, N.
Analysis of Tobacco Control With Semi-Strong Market Theory for Forecasting in the Future.
In Proceedings of the 4th Annual Meeting of the Indonesian Health Economics Association (INAHEA 2017), pages 330-332
ISBN: 978-989-758-335-3
Copyright © 2018 by SCITEPRESS – Science and Technology Publications, Lda. All rights reserved

2 METHODS
This writing has used the method of event study with
an emphasis on the market’s reaction to an event.
The data used in this paper is secondary data. The
data collected includes the names of the listed
issuers that are tobacco companies during the
observation period, daily stock market prices during
the observation period, and the daily composite
stock price index during the period of observation.
The data collection techniques used in this paper are
literature studies focused on events with secondary
data collection to do with tobacco control policies in
Indonesia and stock return movements from
published prices on the IDX and what can be
accessed through the Yahoo Finance website.
3 RESULTS
In this paper, the authors tested the reaction of
abnormal return during an event adapted from
MacKinlay (1997), where the abnormal return
calculates each issuer's shares before and after the
date of cash dividend announcement. The data
obtained was from other historical reports on the
IDX period 1992 to 2004. The object of this study is
the market reaction in terms of the absence of an
abnormal return around the announcement date
caused by the information absorbed by investors
from the stock dividend policy announcement
resulting in a change in the stock prices.
Table 1: Description of abnormal return data
Description of Abnormal Return Data
N Minimum
M
aximum Mean
Std.
Deviat
ion
Before 39 -.849 .168 -.03269 .15264
5
After 39 -.150 .420 .03197 .13030
4
Valid
N
(listwis
e
)
The market reaction is proxied with an abnormal
return. The market is said to react if there is a
different abnormal return before and after the
announcement of stock dividend that can cause
changes in the stock prices significantly.
4 DISCUSSIONS
In the above results, it can be said that the absence
of significant differences in the abnormal return
before and after the stock dividend announcement
shows that there is no market reaction due to stock
dividend announcement events. When an
announcement event contains information, it causes
an abnormal return change around the dividend
announcement (Ardiana and Nita, 2014).
This study is not in accordance with the
signalling theory that explains that the stock
dividend gives a positive signal because the manager
of the company will inform of the future prospects
the company to the public. Stock dividend does not
provide good returns so investors keep on selling
their shares. This is because the stock dividend made
by the issuers does not provide new information that
causes the investors to stay interested in the shares.
Stock dividend events conducted by issuers do not
have enough information that is anticipated by the
market so it does not affect the return obtained by
the investors. Stock dividend by issuers is not able to
increase investment because investors consider the
return expectation to be equal to the actual return
obtained. Stock dividend action will only increase
the number of shares that are outstanding.
Based on the results of this study, the investors in
Indonesia do not regard dividends as an indicator
when deciding to buy or sell shares that are owned.
This may indicate that investors are less interested in
stock returns in the form of dividends and prefer
capital gains as returns from any investments made.
The return of capital gains is obtained from the
difference between the selling price of the shares
which is greater than the purchase price of the
shares. In this case, the investor does not get any
amount of profit above normal. These results
support a half-robust efficiency market that indicates
a state where the prices reflect not only past prices,
but also all published information. In other words,
financiers do not gain above normal profit by
utilising public information (Jogiyanto, 2003).
Tobacco control policy is an independent
variable (X) with interval scale and the indicator is
the date of policy announcement (t0). Events studied
in this research is tobacco control policy. These
policies during the period 2003 to 2012. The
observation period used. The period is estimated to
be examined for 247 days, from t-252 to t6 before
Analysis of Tobacco Control With Semi-Strong Market Theory for Forecasting in the Future
331

the day of the event. The event window is
researched for 11 days, from t-5, t0, to t + 5. Before
discussing the variables to be used in the control
policy. Return which is the rate of investor return on
investment and market return is the reaction rate
against. Stock returns the latest results from stock
prices. The market index used is the Composite
Stock Price Index. Therefore, the variables used to
determine the impact on the capital market in
Indonesia with the abnormal return of each share.
Abnormal return calculation is the difference
between the actual return that occurs with the
expected return of the investor (expected return).
Return of expectation must be estimated and in this
research using market model.
5 CONCLUSIONS
The conclusions in this paper are as follows:
1. Based on the results of the first hypothesis
testing, it can be concluded that there are
abnormal returns obtained by investors in the
Indonesian capital market around the tobacco
policy announcements in 2003, 2009, and 2012
respectively.
a. PP no. 19 of 2003 on Security Cigarettes
for Health responded as good news on four
days before the announcement, and on the
day of the announcement due to the
abnormal return positive move.
b. The day of the 2003 WHO Framework
Convention on Tobacco Control (FCTC)
came out as bad news for the market
because the abnormal return was negative at
t [-5, -4, -1,0, + 2, + 3, + 5], although the
value was not statistically significant.
c. The announcement of RI Law. 36 Year
2009 on Health gave a positive impact
abnormal return for the market although it
is not statistically significant.
d. Since PP No. 109 in 2012 on Security of
Ingredients Containing Addictive
Substances in the form of Tobacco Products
for Health was announced, for three days
after the announcement, the market
received a negative signal with a negative
abnormal return value and then moved
postively then down again on the fifth day
after the announcement.
2. There is an average difference in the abnormal
returns before and after tobacco control policies
but the value is not significant.
3. By testing One Way Anova, it is noted that the
average abnormal return is different and also has
a different population variance.
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