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

Audrey M. W. Yolanda (), Baginda Hamzah and Andi Raina Ananda Herdiyana
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Audrey M. W. Yolanda: Hasanuddin University
Baginda Hamzah: Hasanuddin University
Andi Raina Ananda Herdiyana: Hasanuddin University

A chapter in Proceedings of the 10th International Conference on Accounting, Management, and Economics (10th ICAME 2025), 2026, pp 1320-1333 from Springer

Abstract: 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.

Keywords: ESG disclosure; firm risk; total risk; idiosyncratic risk; signalling theory; Indonesia (search for similar items in EconPapers)
Date: 2026
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DOI: 10.2991/978-94-6239-709-5_91

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