Stock market response to battery electric vehicle tax incentives in Indonesia

Type of the article: Research ArticleAbstractBattery electric vehicle fiscal incentives are increasingly used to accelerate transportation decarbonization, yet their implications for investors in emerging economies remain poorly understood. This study analyzes the short-term response of ten Indonesia Stock Exchange-listed firms associated with the electric-vehicle value chain to the introduction of Indonesian Minister of Finance Regulations No. 8/2024 and No. 9/2024. An event-study design was applied using a Market Model estimated over 120 trading days, cumulative abnormal returns, and standardized abnormal trading activity. Event-induced variance, cross-sectional dependence, multiple testing, nonsynchronous trading, alternative event dates, firm-level contamination, and placebo periods were incorporated into the robustness analysis. For the primary event specification centered on 12 February 2024, the full-sample cumulative average abnormal return over days 0 to +2 was +1.536% but statistically insignificant (p = 0.332). Mean standardized abnormal trading activity was also positive at +0.236 but insignificant (p = 0.399). Accordingly, neither the predicted positive return response nor the increase in abnormal trading activity was supported. The previously identified negative downstream effect did not remain significant after data correction and multiple-testing adjustment. Re-centering the event on the 15 February legal-effective date produced a significant –3.862% return, although contemporaneous political, corporate, and industry events prevent clean attribution. The findings indicate a heterogeneous and event-date-sensitive short-term response rather than a uniform valuation effect.