Stock market efficiency and liquidity: The Indonesia Stock Exchange merger

This study investigates the market liquidity and efficiency of the merger between the Surabaya Stock Exchange and the Jakarta Stock Exchange into the Indonesia Stock Exchange (IDX). Efficiency theory and scale economies are applied to identify the liquidity and efficiency levels of firms. Results indicate that large market capitalization companies and the non-financial sector achieved greater market efficiency than their counterparts. Despite foreign ownership reduces market efficiency for large market capitalization firms, small market capitalization firms increase market efficiency via merger. The IDX composite index demonstrated weak-form efficiency, with LQ45 index returns explaining up to 29.3% of the price movements and up to 8.5% of the IDX returns.