The Influence of Environmental, Social, and Governance (ESG) Scores on Stock Returns Using Firm Size as a Control Variable: A Case Study of LQ45-Indexed Companies Listed on the Indonesia Stock Exchange (2019–2023)

Nabilah Putri Nasrina; Khairunnisa Khairunnisa

doi:10.31538/iijse.v8i3.7943

Nabilah Putri Nasrina Universitas Telkom, Bandung, Indonesia
Khairunnisa Khairunnisa Universitas Telkom, Bandung, Indonesia

DOI: https://doi.org/10.31538/iijse.v8i3.7943

Keywords: ESG, IDX, Firm Size, Control Variable

Abstract

This study investigates the influence of Environmental, Social, and Governance (ESG) scores on stock returns, incorporating firm size as a control variable. The research focuses on companies listed in the LQ45 index on the Indonesia Stock Exchange (IDX) during the period from 2019 to 2023. A total of 18 companies were selected through purposive sampling, yielding 90 panel data observations. This study employs a quantitative approach with an explanatory research design. Descriptive statistics and panel data regression analyses were conducted using the EViews application to assess both the individual (partial) and joint (simultaneous) effects of ESG dimensions on stock returns. The findings reveal that the Environmental and Governance scores significantly and positively affect stock returns, indicating that companies with higher environmental responsibility and stronger governance mechanisms tend to deliver better stock performance. In contrast, the Social score does not exhibit a statistically significant effect on stock returns, suggesting that social initiatives are yet to be perceived as a major investment consideration in the Indonesian capital market. The control variable, firm size, was included to account for the effect of company scale on stock performance. Overall, the results support the signaling theory, which posits that ESG disclosures serve as credible signals to investors.

Downloads

Download data is not yet available.

References

Aditama, F. (2022). Analisis Pengaruh Environmental, Social, Governance (ESG) Score terhadap Return Saham yang Terdaftar di Index IDX39. Contemporary Studies in Economic, Finance and Banking, 1(4), 592–602. https://doi.org/10.21776/csefb.2022.01.4.05

Alamsyah, A., Ayu, S. P., & Rikumahu, B. (2019). Exploring Relationship Between Headline News Sentiment and Stock Return. IEEE.

Denanti, S. P., Yunita, I., Widarmanti, T., & Ferreira Machado, J. M. (2023). The Correlation of Headline News Sentiment and Stock Return during Dividend Period. 2023 International Conference on Digital Business and Technology Management, ICONDBTM 2023. https://doi.org/10.1109/ICONDBTM59210.2023.10327342

Elizabeth, S. M. (2023). Pengaruh Earning Per Share (EPS) Terhadap Harga Saham Dimediasi Oleh Return On Equity (ROE) Pada Perusahaan Sektor Perbankan Yang Terdaftar Di Bursa Efek Indonesia (BEI) Periode Tahun 2018-2021. Forum Bisnis Dan Kewirausahaan Jurnal Ilmiah Multi Data Padang, Vol 12 No 2.

Fitri, K., & Nurmila, R. (2023). Bentuk Instrumen Pasar Modal. https://www.researchgate.net/publication/370653368

Giantari, T. (2024). Menavigasi Dunia Investasi Hijau: Memilih Saham dengan ESG dan Ukuran Perusahaan. Jurnal Proaksi, 11(3), 501–516. https://doi.org/10.32534/jpk.v11i3.5835

Irawan, J., & Ruslim, H. (2023). Faktor-Faktor Yang Mempengaruhi Kinerja Keuangan Perusahaan Sektor Barang Konsumsi. Jurnal Manajerial Dan Kewirausahaan, 05(03), 648–657. www.idx.co.id

Jeanice, J., & Kim, S. S. (2023). Pengaruh Penerapan ESG Terhadap Nilai Perusahaan di Indonesia. Owner Riset & Journal Akuntansi, 7(2), 1646–1653. https://doi.org/10.33395/owner.v7i2.1338

Lisin, A., Kushnir, A., Koryakov, A. G., Fomenko, N., & Shchukina, T. (2022). Financial Stability in Companies with High ESG Scores: Evidence from North America Using the Ohlson O-Score. Sustainability (Switzerland), 14(1). https://doi.org/10.3390/su14010479

Loeis, M., & Alexander, D. (2023). Does ESG Initiatives Affect Market Value and Profitability for Public Listed Companies in Indonesia? In Proceedings of the 1st Bengkulu International Conference on Economics, Management, Business and Accounting (BICEMBA 2023), Advances in Economics, Business and Management Research 268 (pp. 90–94). https://doi.org/10.2991/978-94-6463-328-3_11

Luo, D. (2022). ESG, liquidity, and stock returns. Journal of International Financial Markets, Institutions and Money, 78. https://doi.org/10.1016/j.intfin.2022.101526

Maulana, I. (2023). ESG Risk Determinant Factors: Study on Indonesia Listed Firm. Jurnal Wahana Akuntansi, 18(1), 89–104. https://doi.org/10.21009/wahana.18.016

Mulyono. (2023). Business Sustainability Performance on Pandemic: Lesson from IDX ESG Leaders Company. E3S Web of Conferences, 426. https://doi.org/10.1051/e3sconf/202342602067

Ropiah, S., & Jayanti, D. (2024). The Influence of Environmental Social Governance (ESG) and Dividend Payout Ratio (DPR) on Stock Returns (Case Study on Companies Listed on IDXESGL BEI Period 2020-2022. COSTING: Journal of Economic, Business Adn Accoun, 7.

Samosir, D. P., & Alvia, L. (2024). The Influence of Integrated Reporting and ESG Risk on Sustainable Development Goals in LQ45 Index Companies for the 2020-2022 Period. In International Journal of Economics (Issue 2).

Sugiyono. (2023). Buku Metode Penelitian Kuantitatif Kualitatif dan R&D. CV. ALFABETA.

Suhindarto. (2024, December). Outlook Perekonomian Indonesia 2025: Optimisme Dalam Menhadapi Dunia Yang Lebih Inward-Looking. PEFINDO Media Ekonomi Dan Bisnis.

Syahza, A. (2021). Buku Metodologi Penelitian Edisi Revisi Tahun 2021. UR Press Pekanbaru.

Torre, M. La, Mango, F., Cafaro, A., & Leo, S. (2020). Does the ESG index affect stock return? Evidence from the Eurostoxx50. Sustainability (Switzerland), 12(16). https://doi.org/10.3390/SU12166387