Turnaround Strategy of Financially Distressed Company: Empirical Study of Manufacturing Company Listed on Indonesia Stock Exchange

The purpose of this article is to examine financially distressed companies in Indonesia and their restructuring strategies. The strategies we observed are merger and acquisition, CEO turnover, and employee lay-off. This study tries to identify the difference of abnormal return and average abnormal return before and after the strategies announcement. This study uses event study and market model method. Through purposive sampling, 30 companies were categorized as financially distressed using Altman z-score in the period of 2009-2011, and 14 events were identified as turnaround strategies in the period of 2012-2017 as the sample. The observation period was 10 days prior to, 1 day during, and 10 days following the strategies announcement. The research variables are abnormal return assessed using One Sample t-test and average abnormal return assessed using Paired Sample t-test. It was found out that there are three events of merger and acquisitions, five events of CEO turnover, and six events of employee lay-off. The result shows that there is a positive significant difference abnormal return in the merger and acquisition announcement and no significant difference abnormal return for CEO Turnover and Employee Lay-off. The second result shows that there are no significant differences in the average abnormal return of stock before and after merger and acquisition, CEO turnover, and employee lay-off.