The Role of Investor Demographics in Moderating the Effect of ESG Risk Ratings on Stock Price Synchronicity Among Companies Listed on the Idx80 Index of The Indonesian Stock Exchange
Downloads
This research aims to analyze the effect of ESG Risk Rating on stock price synchronicity as a proxy for stock price informativeness among firms listed in the IDX80 Index of the Indonesia Stock Exchange during 2021–2025. The research also examines the role of stock price synchronicity as an information mechanism in stock price formation and the role of investor demographics as a moderating variable in the relationship. In addition, this study considers the differences between green industry and brown industry characteristics in market responses to ESG information. Using panel data regression, this quantitative study analyzes IDX80 companies with Morningstar Sustainalytics ESG ratings. It examines ESG Risk Ratings, stock prices, stock price synchronicity (logit-transformed adjusted R2), investor demographics, industry types, and macroeconomic controls. The findings reveal that ESG Risk Ratings do not significantly affect stock price synchronicity, suggesting that ESG information is not yet fully internalized within the price formation mechanism of the Indonesian capital market. While investor demographics moderate this relationship, the effect is not consistently significant. Instead, industry characteristics, firm size, and macroeconomic factors exert a more dominant influence on synchronicity. By highlighting how non-financial information transmits through price synchronicity, this study provides valuable insights for investors, firms, and regulators regarding market efficiency and behavioral dynamics in an emerging market.
Albuquerque, R., Koskinen, Y., & Zhang, C. (2020). Corporate social responsibility and firm risk: Theory and empirical evidence. Management Science, 65(10), 4451–4469. https://doi.org/10.1287/mnsc.2018.3043
Barber, B. M., & Odean, T. (2008). All that glitters: The effect of attention and news on the buying behavior of individual and institutional investors. Review of Financial Studies, 21(2), 785–818. https://doi.org/10.1093/rfs/hhm079
Bodie, Z., Kane, A., & Marcus, A. J. (2014). Investments: Asia global edition (10th ed.). McGraw-Hill Education.
Bushee, B. J. (1998). The influence of institutional investors on myopic R&D investment behavior. The Accounting Review, 73(3), 305–333.
Chan, K., & Hameed, A. (2006). Stock price synchronicity and analyst coverage in emerging markets. Journal of Financial Economics, 80(1), 115–147. https://doi.org/10.1016/j.jfineco.2005.03.010
Durnev, A., Morck, R., Yeung, B., & Zarowin, P. (2003). Does greater firm-specific return variation mean more or less informed stock pricing? Journal of Accounting Research, 41(5), 797–836. https://doi.org/10.1046/j.1475-679X.2003.00124.x
Fatemi, A., Glaum, M., & Kaiser, S. (2018). ESG performance and firm value: The moderating role of disclosure. Global Finance Journal, 38, 45–64. https://doi.org/10.1016/j.gfj.2018.01.011
Ferreira, M. A., & Matos, P. (2008). The colors of investors’ money: The role of institutional investors around the world. Journal of Financial Economics, 88(3), 499–533. https://doi.org/10.1016/j.jfineco.2007.07.003
Friede, G., Busch, T., & Bassen, A. (2015). ESG and financial performance: Aggregated evidence from more than 2000 empirical studies. Journal of Sustainable Finance & Investment, 5(4), 210–233. https://doi.org/10.1080/20430795.2015.1118917
Gillan, S. L., Koch, A., & Starks, L. T. (2021). Firms and social responsibility: A review of ESG and CSR research in corporate finance. Journal of Corporate Finance, 66, 101889. https://doi.org/10.1016/j.jcorpfin.2021.101889
Hu, J., Zou, Q., & Yin, Q. (2023). Research on the effect of ESG performance on stock price synchronicity: Empirical evidence from China’s capital markets. Finance Research Letters, 103847. https://doi.org/10.1016/j.frl.2023.103847
Hu, M., Zou, L., & Yin, X. (2023). ESG performance and information asymmetry. Finance Research Letters.
Jin, L., & Myers, S. C. (2006). R² around the world: New theory and new tests. Journal of Financial Economics, 79(2), 257–292. https://doi.org/10.1016/j.jfineco.2004.11.003
Kim, O., & Verrecchia, R. E. (1994). Market liquidity and volume around earnings announcements. Journal of Accounting and Economics, 17(1–2), 41–67. https://doi.org/10.1016/0165-4101(94)90004-3
Krüger, P. (2015). Corporate goodness and shareholder wealth. Journal of Financial Economics, 115(2), 304–329. https://doi.org/10.1016/j.jfineco.2014.09.008
Kumar, A., & Lee, C. M. C. (2006). Retail investor sentiment and return comovements. Journal of Finance, 61(5), 2451–2486. https://doi.org/10.1111/j.1540-6261.2006.01063.x
Morck, R., Yeung, B., & Yu, W. (2000). The information content of stock markets: Why do emerging markets have synchronous stock price movements? Journal of Financial Economics, 58(1–2), 215–260. https://doi.org/10.1016/S0304-405X(00)00071-4
Ruan, L., Li, J., & Huang, S. (2024). News or noise? ESG disclosure and stock price synchronicity. International Review of Financial Analysis, 103483. https://doi.org/10.1016/j.irfa.2024.103483
Starks, L. T. (2023). Institutional investors and ESG. Annual Review of Financial Economics.
Starks, L. T., Venkat, P., & Zhu, Q. (2023). Corporate ESG profiles and investor horizons. Review of Financial Studies, 36(5), 1977–2013. https://doi.org/10.1093/rfs/hhac050
Velte, P. (2017). Does ESG performance have an impact on financial performance? Evidence from Germany. Journal of Global Responsibility, 8(2), 169–178. https://doi.org/10.1108/JGR-11-2016-0029
Wu, J. (2022). Did the inclusion of China’s A-shares in the MSCI index improve the information content of listed firms? Analysis based on stock price synchronization and environmental social governance. Wireless Communications and Mobile Computing, 2022, Article 7623580. https://doi.org/10.1155/2022/7623580
Copyright (c) 2026 Rahma Setiani, Lukman Hanif Arbi
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
