ESG Disclosure on Firm Risk: An Empirical Study of Indonesian Companies

DOI

10.2991/978-94-6239-709-5_91How to use a DOI?

Keywords

ESG disclosure; firm risk; total risk; idiosyncratic risk; signalling theory; Indonesia

Abstract

The nexus between Environmental, Social, and Governance (ESG) disclosure and corporate risk management is increasingly pivotal, yet empirical evidence from emerging markets remains fragmented. This study investigates the influence of ESG transparency on firm risk—specifically total and idiosyncratic risk—among non-financial companies listed on the Indonesia Stock Exchange (IDX). The analysis utilises an unbalanced panel of 376 firm-year observations from the IDX100 index spanning 2017–2023. Underpinned by signalling theory, the study employs a Random Effects Model (REM) to isolate the impact of disclosure practices on risk volatility. The empirical results demonstrate a significant, robust negative association between ESG disclosure and both dimensions of risk. These findings suggest that enhanced sustainability reporting serves as a credible signal of managerial competence and governance quality, thereby mitigating information asymmetry and stabilizing investor expectations. Consequently, this research extends the corporate finance literature by highlighting the risk-mitigating role of ESG within an emerging economy context. It offers strategic implications for corporate executives to utilise transparency as a hedging mechanism and urges regulators to foster standardized reporting frameworks to enhance market resilience.

Copyright

© 2026 The Author(s)

Open Access

Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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TY  - CONF
AU  - Audrey M. W. Yolanda
AU  - Baginda Hamzah
AU  - Andi Raina Ananda Herdiyana
PY  - 2026
DA  - 2026/06/20
TI  - ESG Disclosure on Firm Risk: An Empirical Study of Indonesian Companies
BT  - Proceedings of the 10th International Conference on Accounting, Management, and Economics (10th ICAME 2025)
PB  - Atlantis Press
SP  - 1320
EP  - 1333
SN  - 2352-5428
UR  - https://doi.org/10.2991/978-94-6239-709-5_91
DO  - 10.2991/978-94-6239-709-5_91
ID  - Yolanda2026
ER  -