THE EFFECT OF SYSTEMATIC RISK AND IDIOSYNCRATIC RISK ON INVESTMENT RETURNS WITH ESG DISCLOSURE AS A MODERATING VARIABLE IN INDONESIAN AGRO-INDUSTRIAL COMPANIES
Abstract
In the face of complex market dynamics, companies are required to effectively manage investment risks while simultaneously implementing responsible sustainability practices. This study aims to analyze the effects of systematic risk and idiosyncratic risk on investment returns, as well as the moderating role of Environmental, Social, and Governance (ESG) disclosure in the relationship between these two types of risk and investment returns in Indonesian agro-industrial companies. Using a quantitative approach, the results reveal that systematic risk has a significant negative effect on investment returns, while idiosyncratic risk has a significant positive effect. Furthermore, ESG disclosure is found to reduce the negative impact of systematic risk and strengthen the positive impact of idiosyncratic risk on investment returns. These findings indicate that risk management integrated with sustainability strategies is a key factor in enhancing investment performance. Therefore, agro-industrial companies are encouraged to improve the quality and transparency of ESG disclosures as part of their risk mitigation strategies and efforts to create long-term value for investors.
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Çam, S., Uzkaralar, Ö., & Borak, M. (2024). Idiosyncratic risk and market volatility: Threat or opportunity for returns? A study of Borsa Istanbul stocks. Borsa Istanbul Review, 24(4), 698–709. https://doi.org/10.1016/j.bir.2024.04.001
Cerqueti, R., Ciciretti, R., Dalò, A., & Nicolosi, M. (2021). ESG investing: A chance to reduce risk. Journal https://doi.org/10.1016/j.jfs.2021.100887
Fama, E. F. and French, K. R. (2017), "International tests of a five-factor asset pricing model", Journal of Financial Economics, Vol. 123 No. 3, pp. 441-463
Fama, E. F., & French, K. R. (1993). Common risk factors in the returns on stocks and bonds. Journal of Financial Economics, 33(1), 3–56.
Fatemi, A., Glaum, M., & Kaiser, S. (2018). ESG performance and firm value: The moderating role of disclosure. Global Finance Journal.
Fu, M., & Jia, Y. (2025). The impact of Environmental Social and Governance performance on systematic tail risk of chinese corporations. Sustainability, 17(5). https://doi.org/10.3390/su17051854
Gunawan D., & Melisa A. (2024). Pengaruh kinerja lingkungan terhadap return saham. JURNAL ARIMBI (APPLIED RESEARCH IN MANAGEMENT AND BUSINESS), 4 (2). https://doi.org/10.53416/arimbi.v4i2.278
Gregory, A., R. Tharyan, and J. Whittaker. 2014. “Corporate Social Responsibility and Firm Value: Disaggregating the Effects on Cash Flow, Risk and Growth.” Journal of Business Ethics 124 (4): 633–657.
Keeley, A. R., Chapman, A. J., Yoshida, K., Xie, J., Imbulana, J., Takeda, S., & Managi, S. (2023). ESG metrics and social equity: Investigating commensurability. Sustainametrix-Envisioning a Sustainable Future with Data Science, 16648714, 115. https://doi.org/doi.org/10.3389/frsus.2022.920955
Kusumawati, I., Purnamawati, I., Mulyono, R. (2022). Perbandingan reaksi pasar sebelum dan sesudah pengumuman kasus COVID-19 pertama. Jurnal Akuntansi Integratif, 8 (1). https://doi.org/10.29080/jai.v8i1.752
Maiti, M. (2019). Is idiosyncratic risk ignored in asset pricing: Sri Lankan evidence? Future Business Journal, 5(1). https://doi.org/10.1186/s43093-019-0004-6
Mas’ud, & Wahyuningsih, S. (2023). ANALISIS PDB SEKTOR PERTANIAN TAHUN 2023 2023. Pusat Data dan Sistem Informasi Pertanian Kementerian Pertanian.
Morris, R. D. (1987). Signalling, agency theory and accounting policy choice. Accounting and Business Research, 18(69), 47-56.
Ningrum, I. N., & Hermuningsih, S. (2020). Pengaruh faktor fundamental dan risiko sistematis terhadap return saham. STABILITY Journal of Management & Business, 3(1).
Pulino, S. C., Ciaburri, M., Magnanelli, B. S., & Nasta, L. (2022). Does ESG disclosure influence firm performance? Sustainability (Switzerland), 14 (13). https://doi.org/10.3390/su14137595
Reber, B., Gold, A., & Gold, S. (2022). ESG disclosure and idiosyncratic risk in initial public offerings. Journal of Business Ethics, 179(3), 867-886.
Seker, Y., & Sengür, E. D. (2021). The impact of environmental, social, and governance (esg) performance on financial reporting quality: International evidence. Ekonomika , 100(2), 190–212. https://doi.org/10.15388/Ekon.2021.100.2.9
Sianturi, E. Y., & Feryanto. (2023). Impact of macroeconomics and the Covid-19 pandemic on the sustainability of agribusiness companies in Indonesia. Sustainability Science and Resources, 4, 7–33. https://doi.org/10.55168/ssr2809-6029.2023.4002
Sidiq, A., Suprihati, & Darmanto. (2024). Revealing the role of systematic and non-systematic risk in enhancing optimal portfolio returns in global stock markets. Business and Accounting Research (IJEBAR) Peer Reviewed-International Journal, 8(4), 1398–1404. https://jurnal.stie-aas.ac.id/index.php/IJEBAR
Sugianto, N. A. P., Riandy, C. N., Zainavy, S. F., & Hartikasari, A. I. (2022). The contribution of Environmental, Social, and Governance (ESG) disclosure to reduce investor asymmetry information. Proceedings Series on Social Sciences & Humanities, 7, 56–61. https://doi.org/10.30595/pssh.v7i.472
Yin, X. N., Li, J. P., & Su, C. W. (2023). How does ESG performance affect stock returns? Empirical evidence from listed companies in China. Heliyon, 9(5). https://doi.org/10.1016/j.heliyon.2023.e16320
Yusra, I., & Rahmi, I. A. (2022). Pengaruh likuiditas dan risiko sistematis terhadap return saham pada perusahaan yang terdaftar di BEI tahun 2015-2019. JURNAL REVENUE: Jurnal Akuntansi, 2(2), 205–217. https://doi.org/10.46306/rev.v2i2.58
Published
2025-10-01
How to Cite
APRILLIANTO, Bayu et al.
THE EFFECT OF SYSTEMATIC RISK AND IDIOSYNCRATIC RISK ON INVESTMENT RETURNS WITH ESG DISCLOSURE AS A MODERATING VARIABLE IN INDONESIAN AGRO-INDUSTRIAL COMPANIES.
Proceedings of the International Conference of Islamic Economics and Business (ICONIES), [S.l.], v. 11, n. 1, p. 13-26, oct. 2025.
ISSN 2541-3333.
Available at: <https://conferences.uin-malang.ac.id/index.php/iconies/article/view/3426>. Date accessed: 15 may 2026.
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Articles
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