Impact of Corporate Hedging and ESG on Stock Price Crash Risk: Evidence from Indonesian Energy Firms

Corporate hedging and environmental, social and governance (ESG) affect the transparency of a firm’s information environment because they can reduce information asymmetry and volatility of cash flow. Focus of this research investigates the impact of corporate hedging, as a risk management strategy,...

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Bibliographic Details
Published in:Indian journal of corporate governance 2022-12, Vol.15 (2), p.149-169
Main Authors: Octaviani, Febiriyanti Ayu, Utama, Cynthia Afriani
Format: Article
Language:English
Subjects:
Developing countries
Environmental governance
LDCs
Risk management
Stock market crashes
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Summary:Corporate hedging and environmental, social and governance (ESG) affect the transparency of a firm’s information environment because they can reduce information asymmetry and volatility of cash flow. Focus of this research investigates the impact of corporate hedging, as a risk management strategy, and ESG on stock price crash risk in Indonesian energy firms. This study finds that both hedging and ESG do not affect stock crash risk. This may be caused by a natural hedge conducted by the company. Another explanation is, most energy companies in Indonesia that use hedging do not report the proportion of the amount of hedging on the company’s financial statements. Further, this study fails to find the effect of ESG on stock crash risk. This finding corroborates Silva (2022), who states that the benefit of ESG is less effective in developing countries like Indonesia, which are characterised by weak investor protection and regulation enforcement.
ISSN:0974-6862
2454-2482
DOI:10.1177/09746862221129341