Presenters: Fenita Alvian Saputri, Fitri Laela Wijayati
Affiliation: UIN Raden Mas Said Surakarta
Room: 11
ICIES News- At the 4th International Conference on Islamic Economics Studies (ICIES) 2024, Fenita Alvian Saputri and Fitri Laela Wijayati from UIN Raden Mas Said Surakarta presented their study titled “The Effect of ESG (Environmental, Social & Governance) Disclosure on the Stock Price Crash Risk.” The session, held in Room 11, examined how ESG disclosures impact the risk of stock price crashes among companies listed on the IDX80 index from 2019 to 2022.
The study aimed to assess whether comprehensive ESG disclosure—encompassing environmental, social, and governance factors—affects the risk of stock price declines. The research utilized a sample of 25 companies with 100 observations to analyze this relationship.
Key findings from the study include:
- Overall ESG Disclosure: The study found that overall ESG disclosure does not have a significant impact on the risk of stock price crashes. This indicates that the extent of corporate disclosure related to environmental, social, and governance issues does not directly correlate with a reduced risk of stock price drops.
- Individual ESG Components: When examining the impact of individual ESG subcomponents—environmental, social, and governance disclosures separately—none of these components significantly influenced the risk of stock price crashes. This suggests that, within the studied period and market conditions, these disclosures alone do not substantially affect downside risk.
The study contributes to the literature by highlighting that the effect of ESG disclosures on stock price crash risk may be contextual and influenced by various external factors. The results suggest that simply increasing ESG disclosure may not be sufficient to mitigate stock price risk and that other factors might play a more significant role.
Saputri and Wijayati’s research emphasizes the need for further studies to explore the relationship between ESG disclosures and stock price crash risk under different market conditions and among different types of companies. Their findings prompt a reconsideration of how ESG factors are integrated into financial risk management strategies and highlight the importance of considering additional variables that may impact stock price stability.