Sustainability Effects On Market Risk, Liquidity, And Expected Return
Keywords:
Expected Return; Market Risk; ESG; Liquidity; CAPMAbstract
The expected return of manufacturing companies listed on the Indonesia Stock Exchange is examined in this study in relation to market risk, liquidity, and environmental, social, and governance (ESG) aspects. Inspired by conflicting empirical results and the growing importance of sustainability issues, the study employs a quantitative approach with balanced panel data from 100 businesses between 2022 and 2024. EViews 12 was used for panel regression, and model specification tests such as the Chow, Hausman, and Lagrange Multiplier tests confirmed that the Fixed Effect Model (FEM) was the best estimator. The empirical findings show that, at the 5% significance level, market risk, ESG performance, and liquidity all have favorable and statistically significant effects on predicted return. These results are consistent with the Capital Asset Pricing Model (CAPM), Signaling Theory, and Liquidity Preference Theory, indicating that both sustainability and liquidity disclosures function as reliable market signals. The results provide useful information for investors and financial professionals looking to incorporate risk, sustainability, and liquidity into investment choices. They also add to the body of knowledge on asset pricing in emerging markets.
References
Alaoui Taib, A., & Benfeddoul, S. (2023). The Empirical Explanatory Power of CAPM and the Fama and French Three-Five Factor Models in the Moroccan Stock Exchange. International Journal of Financial Studies, 11(1), 47. https://doi.org/10.3390/ijfs11010047
Amihud, Y., & Noh, J. (2021). Illiquidity and Stock Returns II: Cross-section and Time-series Effects. The Review of Financial Studies, 34(4), 2101–2123. https://doi.org/10.1093/rfs/hhaa080
Banafsyah Imanda Safa, Diana Oktavia Kholimah Wati, Vidinia Nuansa Citra, Felisya Natalia Purwanto, & Maria Yovita R. Pandin. (2025). Hubungan Antara Risiko Sistematis, Tingkat Suku Bunga, dan Return Saham dalam Portofolio Investasi. JOURNAL OF ADMINISTRATIVE AND SOCIAL SCIENCE, 6(2), 322–333. https://doi.org/10.55606/jass.v6i2.2091
Broadstock, D. C., Chan, K., Cheng, L. T. W., & Wang, X. (2021). The role of ESG performance during times of financial crisis: Evidence from COVID-19 in China. Finance Research Letters, 38, 101716. https://doi.org/10.1016/j.frl.2020.101716
Business, ; M, Utami, Y., & Hapsari, I. M. (2024). The Effect of Return on Asset, Debt to Equity Ratio, and Current Ratio Towards The Value of Companies Implementing ESG on The Indonesia Stock Exchange in 2023: ESG Risk Rating as a Moderating Variable. Management & Accounting Journal (BISMA), 1(2), 128. https://doi.org/10.22441/bisma.2024.v15i1.001
Chou, Y., & Tang, W. (2023). Corporate advertising expense and share price synchronization. Finance Research Letters, 56, 104126. https://doi.org/10.1016/j.frl.2023.104126
Defiantoro, D., & Mayasari, I. (2024). BEYOND TRUSTED WHISTLEBLOWING CHANNELS: COLLECTIVE EFFORTS TO CLAMP DOWN ON CORRUPTION. Jurnal Akuntansi Multiparadigma, 15(1). https://doi.org/10.21776/ub.jamal.2024.15.1.05
Du, Q., & Heo, Y. (2022). Political corruption, Dodd–Frank whistleblowing, and corporate investment. Journal of Corporate Finance, 73, 102145. https://doi.org/10.1016/j.jcorpfin.2021.102145
Ellahie, A., Hayes, R. M., & Plumlee, M. A. (2022). Growth Matters: Disclosure and Risk Premium. The Accounting Review, 97(4), 259–286. https://doi.org/10.2308/TAR-2019-0450
Ellili, N. O. D. (2022). Impact of ESG disclosure and financial reporting quality on investment efficiency. Corporate Governance: The International Journal of Business in Society, 22(5), 1094–1111. https://doi.org/10.1108/CG-06-2021-0209
Geyer-Klingeberg, J., Hang, M., & Rathgeber, A. (2020). Meta-analysis in finance research: Opportunities, challenges, and contemporary applications. International Review of Financial Analysis, 71, 101524. https://doi.org/10.1016/j.irfa.2020.101524
Hoang, B. T., & Mateus, C. (2024). How does liberalization affect emerging stock markets? Theories and empirical evidence. Journal of Economic Surveys, 38(3), 877–898. https://doi.org/10.1111/joes.12561
Kilic, M., Yang, L., & Zhang, M. Ben. (2022). The cross-section of investment and profitability: Implications for asset pricing. Journal of Financial Economics, 145(3), 706–724. https://doi.org/10.1016/j.jfineco.2022.06.003
Kristanti, F. T., Salim, D. F., Indrasari, A., & Aripin, Z. (2022). A STOCK PORTFOLIO STRATEGY IN THE MIDST OF THE COVID-19: CASE OF INDONESIA. Journal of Eastern European and Central Asian Research, 9(3), 422–433. https://doi.org/10.15549/jeecar.v9i3.822
Kyei, C. B., Ampong, G. O. A., Owusu Junior, P., Simpe Ofori, K., David N’Dri, K., & N’Da, K. (2024). Information flow between BRVM and ESG stock returns: A frequency-dependent analysis. Research in Globalization, 8, 100192. https://doi.org/10.1016/j.resglo.2024.100192
Manurung, A. H., Machdar, N. M., Simanjuntak, J. M., & Manurung, A. (2024). Determinant of Market Liquidity in Indonesia. Account and Financial Management Journal, 09(05). https://doi.org/10.47191/afmj/v9i5.01
Massa, M., & Zhang, L. (2021). Local investor horizon clientele and IPO underpricing. Journal of Financial Markets, 54, 100587. https://doi.org/10.1016/j.finmar.2020.100587
Messaoud, D., Ben Amar, A., & Boujelbene, Y. (2023). Investor sentiment and liquidity in emerging stock markets. Journal of Economic and Administrative Sciences, 39(4), 867–891. https://doi.org/10.1108/JEAS-11-2020-0198
Musneh, R., Abdul Karim, Mohd. R., & Arokiadasan Baburaw, C. G. A. (2021). Liquidity risk and stock returns: empirical evidence from industrial products and services sector in Bursa Malaysia. Future Business Journal, 7(1), 60. https://doi.org/10.1186/s43093-021-00106-4
Nugraha, A. S., Karyatun, S., & Digdowiseiso, K. (2023). The Effect of Liquidity, Profitability and Solvency on Stock Returns In Manufacturing Companies Listed on The Indonesia Stock Exchange For The 2016-2020 Period. Business and Social Science (IJEMBIS) Peer-Reviewed-International Journal, 3(3), 1154–1163. https://doi.org/10.59889/ijembis.v3i3.304
Pástor, ?., & Stambaugh, R. F. (2003). Liquidity Risk and Expected Stock Returns. Journal of Political Economy, 111(3), 642–685. https://doi.org/10.1086/374184
Paulus, J., Politeknik, P., & Ambon, N. (n.d.). THE EFFECT OF LIQUIDITY ON FIRM VALUE WITH FINANCIAL DISTRESS AND PROFITABILITY AS MEDIATION VARIABLES (Vol. 07, Issue 02).
Reber, B., Gold, A., & Gold, S. (2022). ESG Disclosure and Idiosyncratic Risk in Initial Public Offerings. Journal of Business Ethics, 179(3), 867–886. https://doi.org/10.1007/s10551-021-04847-8
Richardson, M. (2023). Introduction to the ARFE Theme on Financial Economics and COVID-19. Annual Review of Financial Economics, 15(1), 1–5. https://doi.org/10.1146/annurev-financial-060623-032258
Rizwan, M. S., Ahmad, G., & Ashraf, D. (2020). Systemic risk: The impact of COVID-19. Finance Research Letters, 36, 101682. https://doi.org/10.1016/j.frl.2020.101682
Rutkowska – Ziarko, A., Markowski, L., & Abdou, H. A. (2024). Conditional CAPM relationships in standard and accounting risk approaches. The North American Journal of Economics and Finance, 72, 102123. https://doi.org/10.1016/j.najef.2024.102123
Shael, E., Murhadi, W. R., & Utami, M. (2020). Pengaruh Ownership Structure, Free Cash Flow dan Corporate Governance terhadap Biaya Keagenan. Jurnal Keuangan.
Syahniar, E. N., & Wikartika, I. (2024). Faktor yang Mempengaruhi Nilai Perusahaan dengan Moderasi Ukuran Perusahaan pada Sektor Healthcare di Bursa Efek Indonesia. Ekonomis: Journal of Economics and Business, 8(2), 1042. https://doi.org/10.33087/ekonomis.v8i2.1347
Utami, S. W., & Dirman, A. (2022). The Effect of Institutional Ownership, Managerial Ownership, Liquidity, and Leverage on Financial Distress. Asian Journal of Economics, Business and Accounting, 170–181. https://doi.org/10.9734/ajeba/2022/v22i2130700
Vergara-Fernández, M., Heilmann, C., & Szymanowska, M. (2023). Describing model relations: The case of the capital asset pricing model (CAPM) family in financial economics. Studies in History and Philosophy of Science, 97, 91–100. https://doi.org/10.1016/j.shpsa.2022.12.002
Wu, S., Li, X., Du, X., & Li, Z. (2022). The Impact of ESG Performance on Firm Value: The Moderating Role of Ownership Structure. Sustainability, 14(21), 14507. https://doi.org/10.3390/su142114507
Bila bermanfaat silahkan share artikel ini
Berikan Komentar Anda terhadap artikel Sustainability Effects On Market Risk, Liquidity, And Expected Return
