Ekuitas: Jurnal Ekonomi dan Keuangan p-ISSN 2548 – 298X

Akreditasi No. 158/E/KPT/2021 e-ISSN 2548 – 5024

DOI: 10.24034/j25485024.y2024.v8.i1.5948

ESG, CSR, AND COMPANY CHARACTERISTICS IN FORMING INVESTOR

REACTIONS

Alvin Ardian
[email protected]
Martdian Ratna Sari
Sekolah Tinggi Manajemen PPM

ABSTRAK

Penelitian bertujuan mengidentifikasi lebih lanjut apakah investor memanfaatkan pengungkapan non-keuangan
berupa ESG, CSR, dan karakteristik perusahaan pada emiten terindeks IDX ESG Leaders periode 2020-2022
dalam kegiatan berinvestasi mereka. Reaksi investor diukur melalui Stocks Abnormal Return (SABR) dan Trading
Volume Activity (TVA), sedangkan pengungkapan non-keuangan diukur melalui ESG Score dari Morningstar
Sustainanalytics, CSR Index dari GRI Indicator, dan karakteristik perusahaan berupa umur serta jenis industri.
Hasil peneliti melalui 45 sampel yang terdiri dari 15 perusahaan terindeks IDXESGL menunjukkan
pengungkapan ESG berhubungan negatif signifikan terhadap SABR dan TVA, akan tetapi CSR tidak ada
pengaruhnya. Karakteristik perusahaan melalui umur memiliki efek positif terhadap volume perdagangan saham,
sedangkan jenis industri menguasai efek negatif signifikan. Dapat disimpulkan, pengungkapan ESG dianggap
sebagai sinyal negatif oleh investor karena melekatnya risiko pada perusahaan berperforma ESG. Namun, semakin
tua sebuah perusahaan dapat dimanfaatkan oleh manajemen untuk mencapai keunggulan kompetitif dan sebagai
sinyal positif kepada investor karena perusahaan telah memiliki hubungan kuat dengan pemangku kepentingan
sehingga mampu menghasilkan kinerja keuangan yang terus stabil. Selain itu, investor cenderung lebih tertarik
pada perusahaan yang beroperasi di industri dengan risiko rendah, sehingga mereka menghindari sektor-sektor
tinggi emisi karbon.

Kata kunci: ESG, CSR, reaksi investor, karakteristik perusahaan, IDX ESG Leaders.

ABSTRACT

This study aims to determine whether investors use non-financial disclosures in their investment
activities, such as firm characteristics within companies indexed in IDX ESG Leaders during the 2020–
2022 period and ESG (Environmental, Social, and Governance) and CSR (Corporate Social
Responsibility). Investor responses are evaluated using Stocks Abnormal Return (SABR) and Trading
Volume Activity (TVA). At the same time, non-financial disclosures are analyzed through ESG Score
from Morningstar Sustainalytics, CSR Index from GRI Indicator, and firm factors including age and
industry type. Results from a study of 45 data points, including 15 companies included in IDX ESG
Leaders, suggest a notable inverse connection between ESG disclosure and SABR and TVA. However,
the disclosure of CSR does not demonstrate a substantial effect. Company attributes, particularly age,
benefit the level of trade activity, whereas the kind of industry has a notable adverse effect. To some
extent, investors view ESG disclosure as a negative indication because of the risks that come with
companies that perform in terms of ESG. On the other hand, a company's advanced age can be used by
management to gain a competitive edge and demonstrate stability to investors, thanks to the long-
standing ties with stakeholders that result in steady financial performance. In addition, investors tend
to favor companies in low-risk industries while avoiding high carbon-emitting areas.

Key words: ESG, CSR, Investor Reaction, Company Characteristics, IDX ESG Leaders.

138
 ESG, CSR, and Company Characteristics...– Ardian, Sari 139

INTRODUCTION deration for investors because it can explain

Companies’ investment operations are the company's practices, ranging from finan-
categorized into internal and external cial performance, non-financial disclosure,
(Ritonga, 2020). Companies make internal legal violations, and inherent risks to the
expenditures to improve their operations, possibility of fraud occurrences, thus being
including production quality and quantity, able to react significantly to the stock market
operational efficiency, business line expan- (Song and Han, 2017). Overall, the age and
sion, and technical development (Esterlina industry type of a company can contribute to
and Firdausi, 2017). However, external financial performance, financial reporting,
investments involve gathering cash from eroding delays in financial report completion
different investors by selling stocks or bonds, (Gaol and Sitohang, 2020), audit delay (Indra
partnering on projects, and merging compa- and Arisudhana, 2017); enhance social and
nies. These monies can enhance internal environmental responsibility disclosure
regions (Esterlina and Firdausi, 2017). (Dewi and Keni, 2013), underpricing
However, firms primarily use these invest- (Kusuma, 2015), stock market reactions
ments to build trust with stakeholders, par- (Song and Han, 2017), earnings quality
ticularly investors, to improve visibility and (Anjelica and Prasetyawan, 2014), and stock
corporate reputation on the stock exchange, trading volume by investors (Kusuma, 2015).
similar to revealing essential social, environ- Furthermore, several multinational com-
mental, and community information (Tan et panies have opted to publish sustainability
al., 2016) that aligns with the signaling theory performance reports as a communication
put forth by Spence (1973), which states that tool to enhance communication with inves-
corporations must undertake actions to tors, although it is not mandatory (Martin
attract the interest of external parties and and Moser, 2016). Not only investors but
encourage them to invest in the company. conventional asset managers who manage
Wong (2021) revealed that sustainable client funds (investors) and the companies
and responsible investments, considering themselves also consider ESG factors in the
various Environmental, Social, and investment process (Van-Duuren et al.,
Governance (ESG) factors in operations, can 2016). Martin and Moser (2016), and Pérez et
attract investor interest. Consistent with the al. (2020) state that sustainability perfor-
research of Gardina et al. (2014), Gentzkow mance considering ESG factors has become a
and Kamenica (2017), Cheng et al. (2015), and hot topic due to its significance in investment
Cohen et al. (2017), who argue that Corporate considerations globally. Furthermore, this is
Sustainability Reports (CSR) can convey attributed to the ability of both factors to
signals related to actual ESG performance serve as a resource advantage when inte-
and the quality of ESG disclosure, CSR can grated into a company's operational prac-
be a material assessment for external parties tices, formulated to impact cash flow and
considering investments. The characteristics Corporate Financial Performance (CFP).
of companies, such as size, age, industry As a preference, investors tend to choose
type, and company profitability, can also to invest in companies with sustainable and
generate significant stock movements substantive ESG performance (Wen et al.,
(Kusuma, 2015). The age of a company can 2022). Supported by the findings of Zadeh
serve as an investment criterion for inves- and Serafeim's survey (2018), as many as 82%
tors, illustrating the extent of a company's of global investors utilize ESG disclosure in
struggle to survive and rebound amidst the investment considerations as a material
intricacies of the business world while maxi- reference for a company's financial perfor-
mizing business opportunities in the econo- mance. The KPMG International Survey of
my (Martha and Gina, 2021). Meanwhile, CSR (2013) also documents that 93% of 250
industry type can be an investment consi- global companies voluntarily disclose CSR,
140 Ekuitas: Jurnal Ekonomi dan Keuangan – Volume 8, Nomor 1, Maret 2024 : 138 – 163

and similarly, 86% of 100 large companies in risk of financial decline and a positive
the United States operate with sustainability relationship between ESG performance and
performance. These results align with market value (Wen et al., 2022). Hawn et al.
Morgan Stanley's (2019) observation that (2018) suggest a positive association between
85% of individual investors and 95% of strong CSR practices and investor sentiment
millennials are interested in considering sus- that companies with high CSR accreditation
tainability for investment decisions. Wong tend to be viewed favorably. Thus, ESG and
(2021), as the Director and Head of Research sustainability investments like CSR are pre-
in Indonesia, documents that investment dicted to continue to increase in advanced
decisions based on ESG are dominantly economies, such as China, amounting to
implemented by global investors, accounting USD 1.57 trillion in 2019 and reaching USD
for 50%, while 30-40% are starting to be 2.66 trillion in 2021 (Cohen et al., 2017).
explored by domestic investors. In line with In Lebanon and the United States,
BNP Paribas Asset Management Global sur- companies disclosing social and environ-
vey (2021), investment decisions based on mental issues influence investor investment
ESG experienced a sharp increase due to decisions through stock price movements
public concerns about the future impact of because such disclosures indicate the level of
climate change. The World Economic Forum credibility in financial reporting, thereby
2020, also states that the potential impact of influencing market valuation (Cohen et al.,
climate change implies that all companies are 2017; Faninda and Setiawan, 2022; Flammer,
advised to incorporate sustainability aspects 2012). Suttipun and Yordudom (2022), Brecht
in the form of ESG and CSR. et al. (2018), and Huaypad (2019) document
Nearly all institutional investors are the relationship between environmental and
motivated by ESG because it can achieve social information disclosure and significan-
high levels of long-term financial returns, tly positive market reactions in Thailand,
stock performance, dividends, social returns, with governance producing the opposite
and better risk management from accredited effect. Meanwhile, Kirkerud and Tran (2019),
ESG companies (Wen et al., 2022; Dyck et al., examining the European Union, show sig-
2019; Boffo and Patalano, 2020; Pástor et al., nificantly negative research results as ESG
2021; Pedersen et al., 2021). Not only ESG but disclosure burdens companies. The Global
non-professional investors also prefer to Sustainable Investment Alliance (GSIA) in
invest in companies that implement CSR 2018 notes that Europe and the United States
activities because they can boost sales from are the top three categories in sustainable
an increased customer base and lower the investment, accompanied by Japan, as
cost of equity. Therefore, this concept can be Tanimoto (2019) documented. The stock
a consideration for investors in deciding market in Japan needs to be more mature to
their investment portfolios (Cheng et al., appreciate the sustainability performance
2015; Cohen et al., 2017; Martin and Moser, (CSR) of companies, as high information
2016). Additionally, to mitigate financial asymmetry results in each investor having
risks, investors tend to be selective about limited information about a company's social
companies that disclose ESG and sustain- responsibility behavior. However, the Global
nability performance, as these companies are Steering Group Impact Investment (GSG)
inclined to withstand stock market shocks (2022) concludes that both individual and
and have lower issues with capital and institutional investors in Japan express a
working capital (Cheng et al., 2014; Zadeh desire and interest in investing in companies
and Serafeim, 2018). Research results de- with sustainable performance. Consequen-
monstrate that high-quality ESG disclosure tly, GSIA accreditation does not show the
strengthens the negative relationship be- expected high intensity and substance;
tween a company's ESG performance and the
 ESG, CSR, and Company Characteristics...– Ardian, Sari 141

instead, the opposite is found (Murashima, formation asymmetry in the context of cor-
2020; Tanimoto, 2019). porate management and investors. In such a
In Indonesia, investment based on sus- scenario, management, as the signaling
tainability performance considerations has party, possesses superior knowledge com-
positive prospects due to the commitment of pared to investors, who have limited infor-
the Republic of Indonesia government mation (Bergh et al., 2014). Consequently,
through the Sustainable Roadmap imple- management can strategically disclose infor-
mented in 2014 (Otoritas Jasa Keuangan, mation to influence investors' decisions. The
2014). Furthermore, the Indonesia Stock information disclosed can be positive or
Exchange has recently created a new index negative, and both types can be valuable to
category known as IDX ESG Leaders investors (Yasar et al., 2020).
(IDXESGL) in December 2022. This index Critically, interpreting past information
represents the stock market favored by is crucial to understanding its current signi-
issuers who fully commit to environment- ficance, and new information also plays a
tally, socially, and governance-conscious role in shaping investors' perceptions
practices in Indonesia. According to ESG (Steigenberger and Wilhelm, 2018). The
Indonesia Capital Market (2023), at least 15 quality and relevance of the information dis-
to 30 selected companies are chosen based on closed are paramount for it to be impactful
ESG scores, financial performance, and high also the signaling party's reputation, in terms
stock sales liquidity assessments. Therefore, of trust & prestige, is essential for the signals
based on the earlier descriptions, the to be effective and lead to desired actions by
researcher is enthusiastic about conducting investors (Bergh et al., 2014; Yasar et al.,
experiments using ESG and CSR disclosures 2020).
and company characteristics by investors/
stock market participants. Regarding charac- Resource-based Theory (RBT)
teristics, the study only utilizes age and RBT posits that firms can achieve a sus-
industry type, as analyzed by Anjelica and tainable competitive advantage by leve-
Prasetyawan (2014); Gaol and Sitohang raging their unique and valuable resources
(2020); Kusuma (2015); Prasetyo (2019); (Barney, 1996). These resources must be
Prassetio et al. (2022); Song and Han (2017). difficult for competitors to imitate and scarce
The researcher indicates whether environ- in order to provide a long-term advantage
mental, governance, and social responsibility (Alvarez and Barney, 2017; Bromiley and
disclosure data, age, and industry type pu- Rau, 2015; Kozlenkova et al., 2014). A good
blished by companies trigger investor reac- CSR reputation can be considered an in-
tions. Investor reactions can be examined tangible resource that strengthens brand
through event studies with measurements of value and creates a competitive advantage
abnormal return and trading volume acti- (Lourenço et al., 2014). Furthermore, re-
vity, essentially reflecting significant search suggests that a strong ESG reputation
changes in stock prices and transaction can lead to improved financial performance,
volumes as conducted in previous literature increased investments and economic oppor-
(Capelle-Blancard and Petit, 2017; Cohen et tunities, higher employee productivity, also
al., 2017; Flammer, 2012; Rettob and Sutrisno, easier access to financial resources
2016; Suttipun and Yordudom, 2022; (Deephouse et al., 2016).
Wicaksono and Adyaksana, 2020).
Stakeholder Theory
THEORETICAL REVIEW The theory as proposed by Freeman
Signaling Theory (1999), emphasizes that businesses have a
Building on the work of Spence (1973), responsibility towards various stakeholders,
this theory examines the phenomenon of in- including shareholders, employees, custo-
142 Ekuitas: Jurnal Ekonomi dan Keuangan – Volume 8, Nomor 1, Maret 2024 : 138 – 163

mers, suppliers, government, and the com- performance, making it a priority in decision
munity. These stakeholders are intercom- making processes for its impact on corporate
nected, forming the foundation of the bu- value (Capelle-Blancard and Petit, 2017).
siness (Freeman, 2017). Andriof et al. (2017) Crace and Gehman (2023) adds that ESG has
use the analogy of a wheel with the company been established as triple bottom line perfor-
at the center and stakeholders as the spokes, mance, indicating that these three aspects
highlighting the crucial need for constant can guide companies in implementing sus-
interaction. By understanding stakeholder tainable concepts.
needs, interests, and feedback, companies Capelle-Blancard and Petit (2017) dis-
can make decisions that create value for all covered that negative ESG coverage resulted
stakeholders, ultimately maximize long-term in a 0.1% decline in the market value of
value (Jones et al., 2016). companies indexed in the Dow Jones Sector
This focus on stakeholders aligns with Titans in USA. Conversely, the emergence of
CSR and ESG practices such as study by positive ESG information yielded negligible
Flammer (2012) suggests that CSR and ESG value. Furthermore, this is attributed to in-
initiatives can generate stakeholder support vestors paying more attention to negative
by providing valuable resources like finan- ESG coverage, and losses are exacerbated
cial backing, reputation enhancement, strate- when companies promise to provide more
gic partnerships, and regulatory stability. positive ESG information but fail to align
However, satisfying all stakeholders simul- with reality (Yasar et al., 2020). Consequen-
taneously can be challenging. Management tly, the ambiguity in the stock market/legal
must prioritize and make trade-offs based on system indicates the need for companies to
objective criteria, recognizing that maxi- be more aware and informed about ESG
mizing everyone's satisfaction may not be issues.
achievable (Flammer, 2012).
Corporate Sustainability Report (CSR)
Environmental, Social, and Governance The presence of CSR is anticipated to be
Disclosure (ESGD) the company's response to the obligation of
Zadeh and Serafeim (2018) and Van- sustainable social responsibility, demonstra-
Duuren et al. (2016) observed that initially, ting the company's awareness and commit-
only 20 companies in 1990 disclosed ESG ment to enhancing the well-being of the
data, but over time, many companies became broader community (Tan et al., 2016).
enthusiastic and aware of non-financial Supported by Cohen et al., (2017) research in
goals. By 2016, nearly 9000 companies had USA, there is a trend for CSR that on 1991,
published sustainability or integrated re- only 2 companies announced sustainability
ports. Simultaneously, market reactions reports, increasing to 230 companies by 2006.
exhibit positive trends, signifying an in- Then on 2010, PricewaterhouseCoopers (PwC)
creased investor motivation towards ESG survey state that 81% of European countries,
data. This phenomenon occurs because com- including the USA and Canada, issued CSR
panies that disclose more information about reports, especially for companies indexed in
ESG can enhance ESG performance, thereby the S&P 500 (Gipper et al., 2023). Studies by
improving the quality of sustainability Hawn et al. (2018) suggest a global trend to-
report scores (CSR). wards uniformity in CSR practices, poten-
Furthermore, identifying ESG informa- tially reducing differentiation for USA com-
tion in specific industries can be utilized as panies.
forecasts deemed most relevant and pre- On the other side, Sahasranam et al.
dictive of a future CFP (Khan et al., 2016). (2022) research suggests that multi-national
Consequently, ESG disclosure can serve as companies in developing economies like
an assessment of a company's long-term Africa and India often adopt CSR standards
 ESG, CSR, and Company Characteristics...– Ardian, Sari 143

and policies mirroring those of developed return, either positive or negative, also
nations. However, Mugova et al. (2017) known as abnormal returns. Obtaining suita-
argue for context-specific evaluation due to ble information can increase the company's
significant social, economic, and political value, referred to as positive abnormal re-
differences and also environmental crises. turns, while negative SABR indicate the
Developing countries often rely on govern- opposite (Frank and Sanati, 2018). However,
ment regulations to encourage or mandate if it yields abnormal returns of zero, it in-
CSR activities (Abdelhalim and Eldin, 2019; dicates a non-reaction by the stock
Osuji and Obibuaku, 2014). While these market/investors.
regulations aim to accelerate CSR adoption, Not only are stock price changes re-
the focus on compliance may lead to sym- sulting from an event, but Trading Volume
bolic implementation without maximizing Activity (TVA) is also significantly affected
societal benefits (Adib et al., 2019). (Rettob and Sutrisno, 2016). Investors, as
Consequently, symbolic CSR initiatives can representatives of the market, also need to
lead to adverse market reactions, adversely consider TVA in investment considerations,
affecting the stock prices of issuers (Julian which interprets the total number of shares
and Ofori-Dankwa, 2014). To optimize CSR's traded on the stock exchange during the
potential, developing countries need to relevant period (Wicaksono and Adyaksana,
move beyond mere compliance and cultivate 2020) because actively traded stocks can be
a culture of genuine social responsibility, identified based on the level of high volume
aligning corporate actions with societal of shares traded, and this volume can be
needs and government goals (Sharma, 2019). measured in research through TVA (Rettob
and Sutrisno, 2016; Wicaksono and
Investors Reaction Adyaksana, 2020). Furthermore, the increase
The investors referred in this study and decrease in the total number of shares
imply the conditions or stock market traded are entirely influenced by stock
reactions on the Indonesia Stock Exchange prices, so high prices cause investors to avoid
(BEI), including retail, institutional, and or be unable to purchase shares of the related
foreign investors. Market reactions, often company. Thus, it can be concluded that
mentioned in previous literature, can be these two aspects are significantly related, as
examined through event studies, indicating explained by Muthaharia and Yunita (2021)
the reception of information by various SABR resulting from significant changes in
parties and resulting in feedback from these stock prices have a statistically significant
parties, resembling an interaction (Capelle- relationship with TVA because price changes
Blancard and Petit, 2017; Cohen et al., 2017; can influence how much stock trading
Flammer, 2012; Suttipun and Yordudom, volume moves. The changing stock prices
2022; Wicaksono and Adyaksana, 2020). affect the amount of traded shares.
Furthermore, this study analyzes stock mar-
ket behavior regarding stock price move- The Influence of ESG Disclosure on
ments around the time of the event (Ji et al., Investor Reactions
2022). Rettob and Sutrisno (2016) explain that Disclosure by companies regarding ESG
an event is a sudden and spontaneous action aspects through corporate governance can be
or, in other words, not planned, implying a considered by investors in their investment
high market reaction. Therefore, market decisions, as evidenced by Garavaglia et al.
reactions arising from an event can be (2023) and Gentzkow and Kamenica (2017).
measured through Stocks Abnormal Returns Wong and Zhang (2022) describe how the
(SABR). This measurement indicates a impact of ESG disclosure news can affect the
significant difference between the expected stock performance of issuers. Furthermore,
and actual returns, resulting in a surprising negative ESG news covered by the media
144 Ekuitas: Jurnal Ekonomi dan Keuangan – Volume 8, Nomor 1, Maret 2024 : 138 – 163

results in a decline in stock value, while company's strategy to signal to external par-
positive-quality ESG reporting does not ties, serve as a competitive advantage in
affect the stock value of issuers (Capelle- competing with competitors, and satisfy
Blancard and Petit, 2017). So, the investors stakeholder interests.
are more aggressive towards statements and H1a: ESG disclosure has a positive effect on
practices that negatively affect ESG disclo- SABR.
sure, aligning with the findings of Burke H1b: ESG disclosure has a positive effect on
(2020) and Crifo et al. (2015). It is explained TVA.
that companies irresponsibly addressing
ESG issues significantly incur higher capital The Influence of CSR Disclosure on
costs, limited access to equity financing, and Investor Reactions
even the destruction of shareholder value. Investors may utilize CSR disclosure to
On the other hand, Kirkerud Tran (2019) assist in predicting future income and cash
found that ESG disclosure is classified as a flows as documented by Murashima (2020)
burden by companies due to the various high that CSR is an initiative undertaken by
costs associated with its implementation. entities to contribute for satisfy stakeholders.
Additionally, investors, especially retail But, still it is expected that companies should
investors, are found to be more interested in engage in social activities as a form of
non-ESG aspects related to financials, such as responsibility to the community (Tan et al.,
company revenue performance (Moss et al., 2016). Investors positively tend to react when
2020). Align with Garavaglia et al. (2023), management focuses on social disclosure
who found that many companies engage in investments rather than investments to
ESG Stopping Effect or the discontinuation finance the company in the future, because
of ESG initiatives due to concerns about the the value premium derived from disclosing
potential negative financial impact, leading green investments may not cause significant
to a trade-off between financial and non- market fluctuations if investor preferences
financial aspects. Consequently, their re- remain consistent with the social benefits of
search indicate that investors react more ne- CSR. (Martin and Moser, 2016).
gatively to companies that cease ESG initia- Tan et al. (2016) found positive results
tives than those that postpone general busi- from CSR disclosure on investor reactions
ness initiatives. Investors are highly sensitive that become a crucial consideration for
to a firm’s ethical considerations when stop- investors in portfolio management, helping
ping ESG initiatives. It demonstrates that in- them assess the extent of a company's social
vestors have a high level of responsibility for responsibility toward sustainability issues.
the social and environmental consequences However, Astuti and Nugrahanti (2015) did
of stopping ESG initiatives in the future. not find significance in Indonesia, parti-
Studies by Boffo and Patalano (2020), cularly in manufacturing companies in 2013.
Cheng et al. (2014), Dyck et al. (2019), So, the limited number of companies prac-
Pedersen et al. (2021), Wen et al. (2022), ticing CSR, and investors need help calcu-
Zadeh and Serafeim (2018) stated in reality, lating its economic value, it’s requiring time
operational implementation considering to process CSR disclosure information. But,
ESG resulting in higher long-term gains, Murashima (2020) identified a significant
stable dividends, lower investment risks, impact of CSR reporting on Japanese inves-
and ESG accredited firms inclined to with- tor reactions, that individual investors pre-
stand stock market fluctuations and also ferred positive reporting due to perceived
capitalization issues. Furthermore, public- better opportunities. In contrast, institutional
shing non-financial information like ESG investors expressed the opposite view, citing
should now be a company's operations differences in investment goals, financial
priority. Therefore, this disclosure becomes a literacy levels, and broader access to infor-
 ESG, CSR, and Company Characteristics...– Ardian, Sari 145

mation also they will adjust their investment the use of internal resources like CSR dis-
portfolios based on adverse CSR reporting. closure, companies can garner positive reac-
In line with the findings of Pérez et al. tions and satisfy external parties through
(2020), the research highlights significancies sustainable, responsible business practices,
impact of negative CSR reporting on investor creating a long-term competitive advantage.
reactions. Consequently, investor wealth is H2a: CSR disclosure has a positive effect on
challenging to recover, as society tends to SABR.
emphasize negative announcements more H2b: CSR disclosure has a positive effect on
than positive ones. The potential risks in in- TVA.
vestment decision-making provide insights
into the losses experienced by stakeholders. The Influence of Company Age on Investor
Thus, this characteristic implies a framing Reactions
effect, and fundamentally, human psycho- Investors commonly consider a com-
logy tends to exhibit a 'negativity bias.' pany's age as an indicator of risk and a gauge
Companies are, therefore, emphasized for of its durability and competitiveness, which
their more striking negative news, even ultimately influences their investment deci-
though positive CSR news is prevalent (Lei sions (Khoiriyah and Salman, 2020). Suppor-
and Zhang, 2020). Furthermore, concerning ted by Martha and Gina (2021), this non-
negative CSR information, this reference financial aspect serves as a fundamental
proves more useful since investors eva- investment calculation, with older com-
luating a company's CSR activities require panies signifying extensive experience, ca-
validity and accuracy to reduce bias effects. pable management, and well-established
Additionally, if investors exhibit high sen- internal controls (Martha and Gina, 2021).
sitivity to social and environmental con- Consequently, investors perceive older
cerns, they tend to avoid such risks and focus companies as offering more stable perfor-
on negative news when assessing a com- mance and lower risk profiles (Anjelica and
pany's sustainability performance (Brooks Prasetyawan, 2014). Kaya (2014) also revea-
and Oikonomou, 2018). led that older companies tend to compre-
Because of that, media plays a crucial hend various information that needs to be
role as it serves as a communication channel disclosed in financial and non-financial
to the public, especially users/investors, reports, leading management to emphasize
regarding a company's commitment to sus- positive factors.
tainable performance to reduce information A company's age can be a determinant of
asymmetry (Pérez et al., 2020). Media, acting enhanced CFP and CSR disclosure, as
as an objective platform for covering both suggested by Dewi and Keni (2013). This
positive and negative CSR news, plays a extended operational history implies the
stakeholder-like role due to its influence on management's maturity in overcoming obs-
CSR (Feng et al., 2018). The higher the quality tacles and mitigating risks within the
of media coverage, the more significantly it operational cycle, ultimately demonstrating
can affect a company's extraordinary or a greater ability to manage business oppor-
abnormal stock returns. Therefore, high- tunities effectively. Supporting this notion,
quality media's positive or negative CSR Fodor et al. (2023) and Ning et al. (2014)
reporting can result in abnormal returns found that investor forecasts become more
(Flammer, 2012; Gregory et al., 2014). accurate when considering firm age. This can
As documented by Pérez et al. (2020), be attributed to the fact that a firm age
companies must maintain ethical behavior to signifies its ability to endure and compete in
preserve their image and reputation, because a competitive environment, showcasing its
if company succeed in strengthening signals capacity to navigate through subsequent
to shareholders and stakeholders through years (Kusuma, 2015).
146 Ekuitas: Jurnal Ekonomi dan Keuangan – Volume 8, Nomor 1, Maret 2024 : 138 – 163

Statistically, the findings of Martha and tion scale, workforce, and sensitivity to poli-
Gina (2021), demonstrate a significant favo- tical, environmental, and competitive factors
rable influence of a company's age on the (Teske and Nagrath, 2022).
accuracy of financial information disclosure. Probosari and Kawedar's (2019) study
Conversely, the results of experiments suggests that investors likely consider the
conducted by Dyduch et al. (2017) suggest industry's emission intensity when making
that CSR disclosure is indirectly influenced investment choices. Industries closely asso-
by the significance of a company's age, po- ciated with pollution, carbon emissions, and
tentially generating positive market reac- high environmental contamination are reaso-
tions. However, the studies by Kusuma nably considered significant contributors to
(2015) and Prassetio et al. (2022) imply that a climate change, environmental degradation,
company's age has a limited special rela- and ecosystem destruction. Markets &
tionship with TVA and SABR. society increasingly criticize the negative
H3a: Firm age has a positive effect on SABR. impacts of these industries, as many are now
H3b: Firm age has a positive effect on TVA. aware and concerned about environmental
issues and sustainability. Consequently, nu-
The Influence of Company Industry Type merous investors avoid such industries beca-
on Investor Reactions use companies in these sectors are perceived
Type of industry encompassing an eco- as having high risks, legal regulatory
nomic sector's characteristics and opera- entanglements, and reputation uncertainties.
tional practices, presents diverse challenges Similarly. Studies by Afenya et al. (2022)
in financial and non-financial disclosures demonstrate that industry type can influence
(Fahmi et al., 2019). Supported by Ding et al. market responses to events impacting
(2022), who found that industry type has a financial reporting timeliness, potentially
varying impact on annual and sustainability affecting SABR and investor sentiment.
reporting practices. Industries plays a Kusuma (2015) and Prasetyo (2019) found
significant role in shaping investor decisions that the type of industry has little rela-
and market reactions to corporate events tionship with SABR price changes also TVA
(Kusuma, 2015). Additionally, different in- of shares.
dustry types necessitate diverse approaches H4a: Industry type has a negative effect on
to resource management (Supradnya and SABR.
Ulupui, 2016; Suyono, 2019). This variation is H4b: Industry type has a negative effect on
reflected in industry classification systems TVA.
like the Global Industry Classification Figure 1 below is the research model for
Standard (GICS) (Phillips and Ormsby, this study
2016), which considers factors like produc-

Figure 1
Research Models
Source: Data Processed (2022)
 ESG, CSR, and Company Characteristics...– Ardian, Sari 147

RESEARCH METHODS from 15 companies over three years of re-

The research population includes search. Data were collected through archival
companies listed in the 'IDX ESG Leaders research techniques to obtain reference mate-
index continuously from 2020 to 2022 on the rials for constructing the research frame-
Indonesia Stock Exchange (BEI). This index work. The researcher collected information
is utilized to ensure the relevance and from archives, books, published scholarly
validity of the results as it comprises the "Top articles, relevant news, and other documents,
30 ESG Firms" from all companies listed on including financial, annual, and sustaina-
the BEI. The researcher aims to investigate bility reports from issuers obtained from the
whether investors consider ESG and CSR Indonesia Stock Exchange website.
disclosure in their investment decisions. To Therefore, to identify differences in each
measure investor reactions, the researcher research data, statistical tests are required,
employs the event study research method including (1) descriptive statistical analysis,
used in previous studies, such as Rettob and which plays a role in analyzing the distri-
Sutrisno (2016), to elucidate market respon- bution of data (Sugiyono, 2018); and (2) clas-
ses to an event. The variables studied include sical assumption tests as evidence that the
Stock Abnormal Return (SABR) and Trading research data is good, free from bias, and can
Volume Activity (TVA). be perfected. These tests include normality,
Both variables have a cause-and-effect multicollinearity, autocorrelation, and hete-
relationship, where SABR indicates the ab- roskedasticity. The following is the struc-
normal movement in stock return prices. At tured research model, along with expla-
the same time, TVA reveals the trading nations, followed by the operationalization
volume of shares that can increase or de- of variables.
crease based on the stock return prices. SABRit = α + β1ESGDISit + β2CSRDISit +
Consequently, SABR and TVA data are β3AGEit + β4INDit + β5SIZEit + β6PROFit
identified at time t (H+3 or three days after) +ɛ
and t-1 (H-3 or three days before) in the event RRTVAit = α + β1ESGDISit + β2CSRDISit +
of publishing sustainability reports in the β3AGEit + β4INDit + β5SIZEit + β6PROFit +
researcher's sample. Due to the rapid market ɛ
reaction in the publication area, triggering a Keterangan:
confounding effect phenomenon, the event SABR = Stocks abnormal return
time frame is minimized based on previous RRTVA =Average Trading Volume Activity
literature to overcome observation difficul- ESGDIS = ESG Disclosure
ties (Rettob and Sutrisno, 2016). Observati- CSRDIS = CSR Disclosure
onal data is collected through the Indonesia AGE = Firm Age
Stock Exchange website (idx.co.id) and IND = Industry
Yahoo Finance (finance.yahoo.com). SIZE = Firm Size
The researcher utilized purposive sam- PROF = Profitability
pling to obtain the sample, signifying the ɛ = Error
need for specific criteria in filtering a popu-
lation into a sample. There are at least two Table 1 shows the definition operational
criteria for consideration: (1) companies in- of variables.
dexed in IDXESGL continuously during
2020-2022, identified by ESG Score based on
the issuance of significant evaluations by
BEI, and (2) companies consistently publish-
ing financial, annual, and sustainability re-
ports. After excluding four outlier compa-
nies, the sample resulted in 45 data points
148 Ekuitas: Jurnal Ekonomi dan Keuangan – Volume 8, Nomor 1, Maret 2024 : 138 – 163

Table 1
Operationalization of Variables

Research Variables Variable Measurement

Investors Reaction 1. Stocks Abnormal Return (SABR)
(Astuti and SABRit = Rit - E(Rit)
Nugrahanti, 2015; Explanation:
Rettob and SABRit = Stocks abnormal return time t
Sutrisno, 2016; Rit = Actual Return
Wicaksono and E(Rit) = Expected Return
Adyaksana, 2020) *Actual Return =
Rit = (Pit - Pit-1)/Pit-1
Explanation:
Rit = Actual Return
Pit = Stock prices time t
Pit-1 = Stock prices time t-1
*Expected Return =
E(Rit) = Rmt
Explanation:
E(Rit) = Expected Return
Rmt = Market Index Return
*Return Indeks Pasar:
Rmt = (IHSDGt - IHSGt-1)/IHSGt-1
Explanation:
Rmt = Market Index Return
IHSDGt = Combined Stock Price Index at time t
IHSDGt-1 = Combined Stock Price Index at time t-1
Trading Volume 2. Average Trading Volume Activity (TVA)
Activity RRTVAit = (TVAit + TVAit-1)/2
(Rettob and Explanation:
Sutrisno, 2016; RRTVAit = Average Trading Volume Activity time t
Wicaksono and TVAit = Trading Volume Activity time t
Adyaksana, 2020) TVAit-1 = Trading Volume Activity time t-1
Time t = Event window (H-3 and H+3)
(Rettob and Trading Volume Activity (TVA)
Sutrisno, 2016; TVAit = number of shares traded at time t/number of shares
Wicaksono and outstanding and listed on the BEI at time t
Adyaksana, 2020) TVAit-1 = number of shares traded at time t-1/ number of shares
outstanding and listed on the BEI at time t-1
ESG Disclosure ESGDIS = ESG Score/Risk Rating
(Steen et al., 2020) Obtained from Morningstar Sustainalytics in the BEI Major Evaluation
Report
CSR Disclosure ∑Xit
CSRIt =
(Awuy et al., 2016) NT
Explanation:
CSRIt = Corporate Social Responsibility Index waktu t;
Xit = dummy variable, value of '1' if i indicators are exposed; '0' if i
indicators not exposed;
 ESG, CSR, and Company Characteristics...– Ardian, Sari 149

nt = total (84) indicator at time t;

Firm Age AGE = Year of the research – company’s year established
Industry The dummy variable, value of '1' represents industries associated with
high carbon emissions (i.e., manufacture, carbon production, coal-fired
power generation, oil and gas, transportation, mining, and agriculture).
At the same time, all other industries receive a '0' value.
Firm Size (control SIZE = Ln (Total Assets)
variable) Explanation:
Ln = Natural Logarithm
Profitability (control Return On Assets = Net Income/Total Assets
variable)
Source: Processed (2023)

Table 2
Statistic Descriptive Result

Minimum Maximum Mean Std. Deviation N

SABRit -2.472352 -0.1247287 -1.283117 0.4791044 15
TVAit -8.624454 -4.200967 -6.642939 0.78774161 15
ESGDISit 11.31 29.74 22.33267 5.544518 15
CSRDISit -1.877702 -0.5306283 -1.034915 0.3228342 15
AGEit 0.011236 0.0625 0.0298159 0.0137109 15
INDit 0 1 0.4 0.4954337 15
SIZEit 2.519095 3.459636 3.0098 0.2307 15
PROFit -1.300742 -0.3991888 -0.9768283 0.2347742 15
Source: Primary Data, StataMP-17, Processed (2023)

ANALYSIS AND DISCUSSION tices, particularly regarding ESG disclosure.

Statistic Descriptive Analysis The maximum value is 29.74, with a mean
The results table 2 presents the mini- value of 22.33. Based on these three values, it
mum, maximum, mean, and standard devia- can be concluded that the researcher's
tion and the total number of observation sample is categorized as failing to reach a
objects in the study. SABR obtained a perfect level in ESG Scoring. It is also noted
maximum value of -0.125, with an average of that the standard deviation value is 5.54,
-1.283, a minimum value of -2.47, and a which, compared to the mean, indicates that
standard deviation of 0.4791044. Based on the dispersion of ESG disclosure data has
the aspect of mean < standard deviation, it reached a relatively uniform level. On ave-
indicates that the dispersion of abnormal rage, the researcher's sample shows a posi-
stock returns in the 15 IDXESGL sample tive trend in ESG performance.
companies is not entirely uniform. TVA CSR Disclosure resulted in the slightest,
produced a minimum value of -8.624, a most significant, mean, and standard devia-
maximum value of -4.201, a mean value of - tion values of -1.878, -0.531, -1.035, and 0.323,
6.643, and a standard deviation (st. dev) of respectively, indicating the distribution of
0.788. Similar to Stocks' abnormal returns, CSR disclosure data in the study is not
the distribution of TVA data has not reached entirely uniform, as the standard deviation is
a homogeneous level. higher than the mean value. Additionally,
The minimum value of ESG is 11.31, statistically, the IDX ESG Leaders sample has
indicating that the lower the ESG score, the yet to show a significant level of sustainable
better the performance in sustainability prac- performance. Conversely, firm age shows
150 Ekuitas: Jurnal Ekonomi dan Keuangan – Volume 8, Nomor 1, Maret 2024 : 138 – 163

minimum and maximum values of 0.011 and Normality Analysis

0.062, respectively, based on natural loga- Based on table 3, all variables exhibit a
rithm conversion. Regarding the average and normal distribution because the obtained p-
standard deviation figures obtained, each values have surpassed the minimum thres-
reaching 0.029 and 0.014, it indicates that hold of 5% (Ghozali, 2018).
based on statistical distribution, the data
distribution related to the age of the com- Analisis Multikolinearitas
panies is relatively uniform. The age of the Table 4 concludes that the research data
IDX ESG Leaders-indexed companies from has passed the multicollinearity assumption,
2020 to 2022 has a significant scale, operating demonstrating that the regression model did
for a more extended period. not indicate a correlation among each inde-
Industry obtains the highest and lowest pendent variable, supported by the tolerance
values of 1 and 0 as a dummy variable. values ranging from 0.738 to 0.894, all greater
However, the mean value achieved is 0.4, than 0.1, and the VIF values in the range of 1-
which is smaller than the standard deviation, 2, confirming the absence of multicollinearity
implying that the researcher's sample does because VIF < 10.0 (Ghozali, 2018)
not fall into the category of industries that
significantly contribute to carbon emissions,
pollution, and greenhouse gases.
Table 3
Normality Results

Model Variable Sig. Notes

Skewnesss and Kurtosis SABRit 0.2563 Normally Distributed
TVAit 0.1004 Normally Distributed
ESGDISit 0.0571 Normally Distributed
CSRDISit 0.6398 Normally Distributed
AGEit 0.2259 Normally Distributed
INDit 1.0000 Normally Distributed
SIZEit 0.8709 Normally Distributed
PROFit 0.1277 Normally Distributed
Source: Primary Data, StataMP-17, Processed (2023)

Table 4
Multicollinearity Result

Model Variabel Tolerance VIF Description

SABRit(1) ESGDISit 0.773347 1.29 Free from Multicollinearity
CSRDISit 0.81459 1.23 Free from Multicollinearity
AGEit 0.893655 1.12 Free from Multicollinearity
INDit 0.754108 1.33 Free from Multicollinearity
SIZEit 0.738095 1.35 Free from Multicollinearity
PROFit 0.738095 1.35 Free from Multicollinearity
TVAit (2) ESGDISit 0.773347 1.29 Free from Multicollinearity
CSRDISit 0.81459 1.23 Free from Multicollinearity
AGEit 0.893655 1.12 Free from Multicollinearity
INDit 0.754108 1.33 Free from Multicollinearity
SIZEit 0.738095 1.35 Free from Multicollinearity
PROFit 0.738095 1.35 Free from Multicollinearity
Source: Primary Data, StataMP-17, Processed (2023)
 ESG, CSR, and Company Characteristics...– Ardian, Sari 151

Table 5
Autocorrelation Results

Testing Method Model P-Value Description

Breusch-Godfrey Lagrange Multiplier (LM) SABRit (1) 0.1879 No Autocorrelation
TVAit (2) 0.0634 No Autocorrelation
Source: Primary Data, StataMP-17, Processed (2023)

Table 6
Heteroscedasticity Analysis

Testing Method Model P-Value Description

SABRit (1) 0.7682 Homoscedasticity
Breusch-Pagan
TVAit (2) 0.5907 Homoscedasticity
Source: Primary Data, StataMP-17, Processed (2023)

Autocorrelation Analysis system has already priced the shares,

Based on the results in Table 5, it can be attributing to positive ESG factors by various
understood that both regression models entities; thus, the potential for sudden in-
have been identified to reject the presence of creases will not occur. In conclusion,
a correlation between the residual errors at a although ESG disclosure is considered an
given time of the study and the residual attractive aspect for inves-tors, excessive or
errors in the previous time/year based on the irrelevant disclosures can obscure and over-
Breusch-Godfrey Lagrange Multiplier test, whelm investors in digesting information, as
as the p-values are 0.1879 and 0.0634, both found in the study by Ho (2020). Ground
greater than 0.05 (Aushaf et al., 2020; (2022) also found that this could lead to
Ghozali, 2018; Fathurrahman and uncertainty, causing investors to hesitate and
Setiawansi, 2021; and Samara, 2021). respond negatively. The research findings
are consistent with the empirical study by
Heteroscedasticity Analysis Kim and Koo (2023), where high ESG dis-
The research has met the assumption closure can result in a decrease, instability,
of heteroskedasticity, as evidenced by the p- and even undervaluation of market demand
values of both regression models being and future stock prices.
0.7682 and 0.5907 (table 6), both greater than Furthermore, companies lose direction
0.05. So, the research regression models have in non-financial disclosure guidelines, exa-
verified that there is no constant variance of cerbated by significant differences in asses-
residuals from one observation to another sments between foreign and domestic ESG
(Ghozali, 2018). evaluators. Therefore, consistency and in-
creased guidelines for ESG activities and ra-
DISCUSSIONS tings are necessary. The research results also
The Influence of ESG Disclosure on align with Grewal et al. (2019), who found
Investor Reactions that ESG performance results in adverse
The observation results demonstrate market reactions due to the documentation
that SABR is significantly negatively influen- of non-financial disclosure obligations in the
ced by ESG disclosure, indicating that the European Union (EU). However, more ro-
stronger the ESG disclosure conducted by bust and higher-quality ESG activities can
the sampled companies (IDX ESG Leaders), mitigate the adverse market reaction,
the more sudden the decrease in stock although the results remain negative but are
returns. There is a probability that the market not overly detrimental.
152 Ekuitas: Jurnal Ekonomi dan Keuangan – Volume 8, Nomor 1, Maret 2024 : 138 – 163

Furthermore, although the research respond to the positive ESG disclosures by

sample comprises ESG Leaders formed by various entities fully/perhaps it is still in the
the BEI, which should theoretically elicit a developmental stage.
positive market response, the study's fin- By this point, there is still much uncer-
dings prove otherwise due to the conditions tainty from various aspects, such as govern-
and situations during the research period. ment regulatory hurdles and the need for a
The study observed 15 companies indexed universally accepted single standard for ESG
by IDXESGL over the period 2020-2022, disclosure due to its new and evolving
during which there were fluctuations and nature. The decline in investor interest in
improvements in financial performance due investment decisions is due to confusion and
to the volatile COVID-19 pandemic. Lubis uncertainty in interpreting ESG information.
and Kusuma (2022) documented that 62.7% Additionally, investors may need help com-
of retail investors engaged in trading or paring the ESG performance of each issuer
short-term investments during that period. due to the lack of standardization, making
Therefore, the researcher assumes that them reluctant to use ESG information
investors prioritized short-term financial (Ground, 2022). The research results cannot
goals over long-term ones by investing in prove, as shown in the study by Xie et al.
IDX ESG Leaders, which are believed to have (2019), that high-quality and extensive ESG
sustainability stability in providing capital disclosure can improve financial performan-
gains and dividends. Consequently, the ce, including corporate efficiency, return on
market responded more positively to short- assets, and market value, making it a pri-
term investment gains for family or opera- mary consideration for investors.
tional needs, and there was concern that
companies might not survive the pandemic. The Influence of CSR Disclosure on
Thus, the research findings do not align with Investor Reactions
Hu et al. (2023) and Wang et al. (2023), who The investigation results indicate that
explained that better ESG performance can the disclosure of sustainability performance
reduce stock price vulnerability and simul- (CSR) by the sampled companies does not
taneously enhance positive stock movement significantly impact changes in abnormal
and stability. stock return, thus rejecting H2a, as explained
Regarding the relationship between ESG by the maturity of the current CSR period,
disclosure and TVA in the second regression which various companies have extensively
model, the research findings indicate a simi- adopted. Consequently, investors find it
lar result: ESG also significantly negatively challenging to differentiate between solid
influences the trading volume of stocks in the and weak CSR performance among different
IDX ESG Leaders Index. The ESG disclosure firms, leading them to place less emphasis on
leads to a decrease in the trading volume of CSR performance in their investment eva-
shares, which may be attributed to market luations. These findings align with the
participants being less willing to trade in observations made by Sabbaghi and Xu
non-informative entities. Furthermore, the (2013), who tested the Best 100 Corporate
negative relationship suggested by the re- Citizens in 2010 by the Corporate
search indicates that the Indonesian market, Responsibility (CR) Magazine in the United
particularly IDXESGL, has not fully capita- States. They discovered that high-perfor-
lized on ESG disclosure in their checklist for mance sustainability practices by companies
evaluating companies for investment pur- still result in stable stock returns. Similarly, a
poses (Hutama and Budhidharma, 2022; study conducted in China by Chen et al.
Qodary and Tambun, 2021). This approach (2018) suggested that the relationship be-
only became effective in 2021, making it tween CSR disclosure and investor behavior,
relatively new, and the market has yet to
 ESG, CSR, and Company Characteristics...– Ardian, Sari 153

both individual and institutional, did not that CSR rankings of companies had a non-
exhibit any correlation. effect on stock market reactions, specifically
Astuti and Nugrahanti (2015) also con- on trading volume activity in companies
ducted research that did not find a signi- indexed in the Dow Jones Sustainability
ficant impact on the relationship between Index (DJSI). Xiang et al. (2021) also found
CSR disclosure and abnormal return. Even that CSR performance did not lead to
companies with high and low CSR ratings significant stock trading activities on the
still yielded unfavorable abnormal return Chinese Stock Exchange. These results differ
values for manufacturing and mining com- from the findings of Tan et al. (2016) and
panies listed on the Indonesia Stock Cohen et al. (2017) who identified significant
Exchange (BEI) in 2013 and 2014-2016. impacts or investment decisions influenced
However, Pérez et al. (2020) found contras- by sustainability performance. In contrast,
ting results. Based on Spain and KLD Ratings the study by Chao and Ho (2018) shows that
(S&P 500 and DS 400), they concluded that a sustainability performance hurt stock tra-
more extensive and positive CSR strategy ding volume due to the substantial financial
could significantly enhance abnormal re- contributions generated by sustainability
turns. On the other hand, Becchetti et al. performance that could pose a risk to the
(2012) discovered an adverse effect of CSR on company's financial performance and stake-
abnormal returns in the Domini Index Italy. holders prioritized not only shareholders but
The same results were obtained in the also the community, employees, and the
second model concerning TVA, indicating environment. Consequently, the market
that Corporate Sustainability Report (CSR) clarifies its stance to avoid involvement with
disclosure does not significantly affect com- these companies.
panies indexed in IDXESGL, implying that
H2b is also not accepted. This interpretation The Influence of Company Age on Investor
suggests that investors are concerned that if Reactions
companies prioritize sustainability perfor- Examining how a company's age affects
mance too much, it may impact the primary investor reactions yielded noteworthy re-
goal of the business, which is to increase sults, supporting H3a, which suggested a
profits. Therefore, they overlook CSR dis- positive correlation between the company's
closures by companies. The research findings age and abnormal stock returns. The data
align with the field studies by Awuy et al. demonstrated that older companies tended
(2016), indicating that the market needs to to exhibit higher abnormal stock returns,
recognize the value of non-financial infor- which aligns with the notion that investors
mation in sustainability and annual reports. perceive older companies as more stable,
Despite its importance in their investment experienced, and potentially less risky, lea-
decisions, investors prioritize financial per- ding to a positive market response regarding
formance metrics such as net income, as they stock returns. Furthermore, H3b, proposing
find it more relevant and guiding in achie- a positive relationship between the age of the
ving their targeted stock returns than a com- company and trading volume activity, was
pany's social sustainability achievements. also supported by the research outcomes.
Similar to the results from Astuti and The findings indicated that older companies
Nugrahanti (2015), who examined 113 ma- experienced increased trading volume, sug-
nufacturing entities listed on the Indonesia gesting heightened investor interest and
Stock Exchange (BEI) during the 2013 period, engagement with these established entities.
they found no significant influence exerted The expectation is that older companies may
by CSR on stock trading volume. These attract more attention from investors due to
findings are consistent with the investiga- their perceived stability and reliability.
tions of Durand et al. (2019), who discovered
154 Ekuitas: Jurnal Ekonomi dan Keuangan – Volume 8, Nomor 1, Maret 2024 : 138 – 163

The study contributes to the existing indicates a high impact on securities market
body of knowledge by highlighting the trading.
importance of considering the age factor
when analyzing investor reactions. The The Influence of Company Industry Type
positive impact observed in both abnormal on Investor Reactions
stock returns and trading volume activity for The researcher's findings indicate that
older companies underscores the significan- the type of industry reflecting companies ge-
ce of reputation and trust associated with a nerating high pollution, carbon, and green-
company's longevity in the market. These house gas emissions does not significantly
findings offer valuable insights for investors, impact abnormal stock return rates. In other
analysts, and policymakers in understanding words, investors are not overly concerned
the dynamics of investor behavior concer- about this, as they may have thoroughly and
ning the age of companies in the context of measuredly considered the potential risks
abnormal stock returns and trading volume and impacts related to the environment. The
activity. market generally believes that financial per-
In the second regression model, the formance contributes to enhancing/destroy-
company's age positively contributed posi- ing abnormal stock returns. The empirical
tively to trading volume activity. Observa- findings of the researcher do not align with
tional results indicate that the older a com- the observations of Chen and Yeh (2021),
pany operates, the higher the trading activity Carter et al. (2022), and Goodell and Huynh
in stocks or financial instruments related to (2020), where they found a significant cause-
the research sample, namely companies and-effect relationship between the type of
indexed in the IDX ESG Leaders from 2020- industry and abnormal returns. However,
2022. The advanced age of a company further the researcher's empirical evidence is con-
validates the substantial optimistic potential sistent with various previous literature, such
investors perceive regarding their interest as Huka and Kelen (2022) and Prasetyo
and confidence, given the company's resi- (2019) where each study needed to prove the
lience in the market from inception to the research hypotheses.
present. Moreover, management can esta- After that regarding the industry types
blish a solid reputation, strong business rela- of each IDX ESG Leaders company from 2020
tionships with stakeholders, and financial to 2022, as indicated by the researcher's
and non-financial stability akin to the sample, H4b is accepted because a significant
company's risk management capabilities to negative impact on stock trading volume is
achieve consistent profits over time. The found. The industry types categorized
sustainability of various companies that have through a dummy variable show that com-
proven to endure until now implies their panies classified in environmentally pol-
resilience to changes, such as obstacles in luting industries, such as carbon emitters,
government regulations, community disap- pollution creators, and greenhouse gas
proval, or challenges from society and cus- emitters, significantly worsen stock trading
tomers regarding the company's products. volumes, such as manufacturing and mining
The research findings contradict Hotchkiss industries. This indicates that investors tend
and Jostova (2017) and Kusuma (2015), to be less involved in stock trading in these
suggesting that newer companies show industries because the market is environ-
progressively increasing stock trading and mentally conscious about future impacts.
no influence between the company's age and They also have ethical considerations in their
trading volume activity. However, the investments, and the risks associated with
research results align with the reviews of companies in such industries outweigh the
Fodor et al. (2023), where the age of an entity potential extraordinary risks, including legal
issues, reputational damage, and fines.
 ESG, CSR, and Company Characteristics...– Ardian, Sari 155

Consequently, capital investments in these der perspective, asserting that a company's

industries are avoided. The researcher's fin- social responsibility can signal and satisfy
dings align with the experiments conducted investors in shaping their perceptions and
by Carter et al. (2022), Firli and Rahadian investment decisions, possibly due to their
(2020), and Hersugondo et al. (2021), where inclination toward financial performance
each found that the studied industry types discussions. When connected to resource-
significantly influenced adverse changes in based theory, this lack of association implies
TVA. However, Kusuma (2015) did not find that sustainable performance is not regarded
significant results in the relationship be- as a competitive resource advantage; com-
tween industry types and trading volume pany age holds more significance. Therefore,
activity. CSR is no longer a primary focus in the
recent period, where every company de-
CONCLUSION AND SUGGESTIONS monstrates responsible performance to-
The findings reveal that ESG disclosure wards society, rendering CSR less essential
negatively influences investor reactions, or value-added in evaluating an investor's
while CSR is found to have no impact. The portfolio. However, negative assessments
age and industry type of companies exhibit from investors regarding industries categori-
significant positive and negative influences zed as high environmental polluters lead to a
on TVA, respectively. However, in the case decline in stock trading volume. Consequen-
of SABR, no discernible relationship is tly, the overall market reacts with dimi-
found; subsequently, in the second regres- nished interest based on both research out-
sion model (TVA), new relationships are comes, indicating that companies must take
identified, with both the age and industry ESG issues seriously. In summary, the study
type of companies yielding significant posi- provides valuable insights into the impact of
tive and negative research outcomes. The ESG and CSR disclosure, company charac-
study substantiates signaling theory, teristics on investor reactions, and the intri-
wherein ESG disclosure signals investors cacies of linking them to signaling theory,
that management is navigating environ- resource-based theory, and stakeholder
mental and social risks. The result is a perspectives.
negative response from investors, particu- Therefore, the researcher recommends
larly in industries highly susceptible to envi- that future analysts broaden the research
ronmental risks. However, these findings sample by incorporating additional indices
contradict the resource-based theory, where on the Indonesia Stock Exchange (BEI) that
ESG disclosure should serve as a competitive share similar primary objectives, such as IDX
advantage for the company. Still, investors SRI-KEHATI. They should also consider
perceive such disclosure as indicative of adding independent variables, especially
environmental and social risks, casting financial performance metrics, to strengthen
doubt on the sustainability and long-term future investigative findings, such as
profitability of the company's investments. Earnings per Share (EPS) and Current Ratio
Furthermore, this negative relationship (CR). Additionally, events examined to
also suggests that stakeholders may have measure SABR and TVA should have
excessive expectations or harbor skepticism proximate timelines to ensure greater
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