The Effect of ESG (Environmental, Social, and Governance) Disclosure on Stock Price Crash Risk
Keywords:
Stock Price Crash Risk, ESG Disclosure, Stakeholder Theory, Agency TheoryAbstract
The purpose of this study is to estimate the impact effect of ESG (Environmental, Social, and Governance) disclosure on the risk of falling stock prices of companies listed on IDX80 for the 2019-2022 period. This study's sample size was 25 firms, with a total of 100 observations. The results showed that overall ESG disclosure has no significant effect on the risk of falling stock prices. This suggests that the level of corporate disclosure of environmental, social, and governance information does not correlate with a decrease in stock price risk. When ESG subcomponent disclosures (environmental, social, and governance) were tested separately, the findings also showed no significant impact on stock price crash risk. This suggests that the three ESG components, both as a whole and separately, do not significantly affect downside risk. By demonstrating that the impact of ESG disclosures on stock price crash risk is contextual and depends on many external factors. Further research is needed to better understand this relationship across different market conditions and different companies, as well as to explore other factors that may affect the risk of stock price crash more significantly.
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