Exploring the Impact of Loan-to-Value Relaxation Policy on Property Stocks in Indonesia

Purpose: This study analyzes the reaction of property stocks before and after the issuance of the loan-to-value(LTV) relaxation policy. By using abnormal returns and trading volume activity (TVA), it explores how LTV, which determines the loan amount relative to property value, affects property stock prices. Design/methodology/approach: A sample of 49 property company stocks was studied using a 60-day estimation window and a 20-day event window around the LTV policy. The event study method was used to regress stock and market returns via the single index model to calculate abnormal returns (AR). Trading volume activity trends were also analyzed, followed by a normality test. Findings: The results showed significant differences in abnormal returns before and after the LTV policy, though trading volume activity remained unchanged. This suggests potential government use in refining LTV policies. Research limitations/implications: The f indings reveal that LTV policy changes directly influence property stock prices, providing insights for financial regulators to improve policy efficiency in managing the property market. Originality/value: While financial policies' impact on stock markets is well-researched, this study's focus on LTV policy in the property sector provides a unique perspective on a key regulatory factor.