IDEAS home Printed from https://ideas.repec.org/a/sae/ijcgvn/v15y2022i2p149-169.html

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

Author

Listed:
  • Febiriyanti Ayu Octaviani
  • Cynthia Afriani Utama

Abstract

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.

Suggested Citation

  • Febiriyanti Ayu Octaviani & Cynthia Afriani Utama, 2022. "Impact of Corporate Hedging and ESG on Stock Price Crash Risk: Evidence from Indonesian Energy Firms," Indian Journal of Corporate Governance, , vol. 15(2), pages 149-169, December.
    • Handle: RePEc:sae:ijcgvn:v:15:y:2022:i:2:p:149-169
    DOI: 10.1177/09746862221129341
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/09746862221129341
    Download Restriction: no
    File URL: https://libkey.io/10.1177/09746862221129341?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Andreou, Christoforos K. & Andreou, Panayiotis C. & Lambertides, Neophytos, 2021. "Financial distress risk and stock price crashes," Journal of Corporate Finance, Elsevier, vol. 67(C).
    2. Brenkert, George G., 1998. "Trust, Business and Business Ethics: An Introduction," Business Ethics Quarterly, Cambridge University Press, vol. 8(2), pages 195-203, April.
    3. Yeung, Wing Him & Lento, Camillo, 2018. "Ownership structure, audit quality, board structure, and stock price crash risk: Evidence from China," Global Finance Journal, Elsevier, vol. 37(C), pages 1-24.
    4. Jin, Li & Myers, Stewart C., 2006. "R2 around the world: New theory and new tests," Journal of Financial Economics, Elsevier, vol. 79(2), pages 257-292, February.
    5. Fang, Hanming & Wang, Long & Yang, Yang, 2020. "Human mobility restrictions and the spread of the Novel Coronavirus (2019-nCoV) in China," Journal of Public Economics, Elsevier, vol. 191(C).
    6. Haochang Yang & Peidong Deng, 2021. "The Impact of COVID-19 and Government Intervention on Stock Markets of OECD Countries," Asian Economics Letters, Asia-Pacific Applied Economics Association, vol. 1(4), pages 1-6.
    7. Huang, Shoujun & Liu, Hezhe, 2021. "Impact of COVID-19 on stock price crash risk: Evidence from Chinese energy firms," Energy Economics, Elsevier, vol. 101(C).
    8. Cao, Chunfang & Xia, Changyuan & Chan, Kam C., 2016. "Social trust and stock price crash risk: Evidence from China," International Review of Economics & Finance, Elsevier, vol. 46(C), pages 148-165.
    9. J. Mahadeo & V. Oogarah-Hanuman & T. Soobaroyen, 2011. "A Longitudinal Study of Corporate Social Disclosures in a Developing Economy," Journal of Business Ethics, Springer, vol. 104(4), pages 545-558, December.
    10. Scott R. Baker & Nicholas Bloom & Steven J. Davis & Kyle J. Kost & Marco C. Sammon & Tasaneeya Viratyosin, 2020. "The Unprecedented Stock Market Impact of COVID-19," NBER Working Papers 26945, National Bureau of Economic Research, Inc.
    11. Ding, Wenzhi & Levine, Ross & Lin, Chen & Xie, Wensi, 2021. "Corporate immunity to the COVID-19 pandemic," Journal of Financial Economics, Elsevier, vol. 141(2), pages 802-830.
    12. Kim, Jeong-Bon & Li, Yinghua & Zhang, Liandong, 2011. "Corporate tax avoidance and stock price crash risk: Firm-level analysis," Journal of Financial Economics, Elsevier, vol. 100(3), pages 639-662, June.
    13. Chen, Jun & King, Tao-Hsien Dolly, 2014. "Corporate hedging and the cost of debt," Journal of Corporate Finance, Elsevier, vol. 29(C), pages 221-245.
    14. Feng, Jingwen & Goodell, John W. & Shen, Dehua, 2022. "ESG rating and stock price crash risk: Evidence from China," Finance Research Letters, Elsevier, vol. 46(PB).
    15. Chen, Joseph & Hong, Harrison & Stein, Jeremy C., 2001. "Forecasting crashes: trading volume, past returns, and conditional skewness in stock prices," Journal of Financial Economics, Elsevier, vol. 61(3), pages 345-381, September.
    16. Kim, Seon Tae & Choi, Bongseok, 2019. "Price risk management and capital structure of oil and gas project companies: Difference between upstream and downstream industries," Energy Economics, Elsevier, vol. 83(C), pages 361-374.
    17. Alberto Manconi & Massimo Massa & Lei Zhang, 2018. "The Informational Role of Corporate Hedging," Management Science, INFORMS, vol. 64(8), pages 3843-3867, August.
    18. Hutton, Amy P. & Marcus, Alan J. & Tehranian, Hassan, 2009. "Opaque financial reports, R2, and crash risk," Journal of Financial Economics, Elsevier, vol. 94(1), pages 67-86, October.
    19. Kong, Dongmin & Shi, Lu & Zhang, Fan, 2021. "Explain or conceal? Causal language intensity in annual report and stock price crash risk," Economic Modelling, Elsevier, vol. 94(C), pages 715-725.
    20. Panayiotis C. Andreou & Constantinos Antoniou & Joanne Horton & Christodoulos Louca, 2016. "Corporate Governance and Firm†specific Stock Price Crashes," European Financial Management, European Financial Management Association, vol. 22(5), pages 916-956, November.
    21. Sohnke M. Bartram, 2005. "The Impact of Commodity Price Risk on Firm Value - An Empirical Analysis of Corporate Commodity Price Exposures," Multinational Finance Journal, Multinational Finance Journal, vol. 9(3-4), pages 161-187, September.
    22. Mo, Kun & Suvankulov, Farrukh & Griffiths, Sophie, 2021. "Financial distress and commodity hedging: Evidence from Canadian oil firms," Energy Economics, Elsevier, vol. 97(C).
    23. Rio Murata & Shigeyuki Hamori, 2021. "ESG Disclosures and Stock Price Crash Risk," JRFM, MDPI, vol. 14(2), pages 1-20, February.
    24. Shasha Liu & Gaowen Kong & Dongmin Kong, 2020. "Effects of the COVID-19 on Air Quality: Human Mobility, Spillover Effects, and City Connections," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 76(4), pages 635-653, August.
    25. Callen, Jeffrey L. & Fang, Xiaohua, 2015. "Religion and Stock Price Crash Risk," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 50(1-2), pages 169-195, April.
    26. Gordon M. Bodnar & Gregory S. Hayt & Richard C. Marston, 1996. "1995 Wharton Survey of Derivatives Usage by US Non-Financial Firms," Financial Management, Financial Management Association, vol. 25(4), Winter.
    27. Jeong†Bon Kim & Zheng Wang & Liandong Zhang, 2016. "CEO Overconfidence and Stock Price Crash Risk," Contemporary Accounting Research, John Wiley & Sons, vol. 33(4), pages 1720-1749, December.
    28. Lel, Ugur, 2012. "Currency hedging and corporate governance: A cross-country analysis," Journal of Corporate Finance, Elsevier, vol. 18(2), pages 221-237.
    29. Li, Xiaorong & Wang, Steven Shuye & Wang, Xue, 2017. "Trust and stock price crash risk: Evidence from China," Journal of Banking & Finance, Elsevier, vol. 76(C), pages 74-91.
    30. Arnold, Matthias M. & Rathgeber, Andreas W. & Stöckl, Stefan, 2014. "Determinants of corporate hedging: A (statistical) meta-analysis," The Quarterly Review of Economics and Finance, Elsevier, vol. 54(4), pages 443-458.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Nian, Hua & Said, Fathin Faizah & Mohd Azam, Abdul Hafizh & Mohd Ariff, Noratiqah, 2025. "Does ESG implementation reduce bankruptcy risk of manufacturing and non-manufacturing firms? Evidence from dynamic panel threshold model," Finance Research Letters, Elsevier, vol. 85(PC).
    2. Lidya NURRAHMAWATI & Anis CHARIRI & Akhmad Samsul ULUM & Inayah Risqi ALISA, 2025. "Ceo Characteristics And Hedging Decisions: Examining The Moderating Role Of Managerial Ability," Studies in Business and Economics, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 20(2), pages 179-199, August.
    3. Luu Thu Quang, 2025. "ESOP Policy, Transparency and Stock Price Crash Risk," SAGE Open, , vol. 15(1), pages 21582440251, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jebran, Khalil & Chen, Shihua & Ye, Yan & Wang, Chengqi, 2019. "Confucianism and stock price crash risk: Evidence from China," The North American Journal of Economics and Finance, Elsevier, vol. 50(C).
    2. Khalil Jebran & Shihua Chen & Ruibin Zhang, 2022. "Board social capital and stock price crash risk," Review of Quantitative Finance and Accounting, Springer, vol. 58(2), pages 499-540, February.
    3. Jebran, Khalil & Chen, Shihua & Zhang, Ruibin, 2020. "Board diversity and stock price crash risk," Research in International Business and Finance, Elsevier, vol. 51(C).
    4. Richardson, Grant & Obaydin, Ivan & Liu, Chelsea, 2022. "The effect of accounting fraud on future stock price crash risk," Economic Modelling, Elsevier, vol. 117(C).
    5. Hao, Jing & Sun, Ran & Gong, Xu & Zhu, Xiaoyu (Ross), 2025. "ESG and stock price crash risk revisited: Evidence from mandatory ESG disclosure policy in China," Pacific-Basin Finance Journal, Elsevier, vol. 91(C).
    6. Xiaoling Chu & Yongheng Deng & Desmond Tsang, 2025. "Firm Leverage and Stock Price Crash Risk: The Chinese Real Estate Market and Three-Red-Lines Policy," The Journal of Real Estate Finance and Economics, Springer, vol. 70(3), pages 544-582, April.
    7. Liu, Xianda & Wei, Zi & Zhao, Sheng, 2024. "Do managers have more incentives to hoard bad news during panic? A study of terrorist attacks and stock price crash risk," International Review of Financial Analysis, Elsevier, vol. 96(PA).
    8. Hu, Juncheng & Li, Xiaorong & Duncan, Keith & Xu, Jia, 2020. "Corporate relationship spending and stock price crash risk: Evidence from China's anti-corruption campaign," Journal of Banking & Finance, Elsevier, vol. 113(C).
    9. Meng, Yongqiang & Shen, Dehua & Xiong, Xiong, 2023. "When stock price crash risk meets fundamentals," Research in International Business and Finance, Elsevier, vol. 65(C).
    10. Yu, Haixu & Liang, Chuanyu & Liu, Zhaohua & Wang, He, 2023. "News-based ESG sentiment and stock price crash risk," International Review of Financial Analysis, Elsevier, vol. 88(C).
    11. Xiaoyu Cui & Jianlei Han & Jeong Bon Kim & Baolei Qi, 2024. "Federal judge ideology, securities class action litigation, and stock price crash risk," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 64(4), pages 4131-4155, December.
    12. Xu, Lin & Rao, Yulei & Cheng, Yingmei & Wang, Jianxin, 2020. "Internal coalition and stock price crash risk," Journal of Corporate Finance, Elsevier, vol. 64(C).
    13. Leilei Gu & Jinyu Liu & Yuchao Peng, 2022. "Locality Stereotype, CEO Trustworthiness and Stock Price Crash Risk: Evidence from China," Journal of Business Ethics, Springer, vol. 175(4), pages 773-797, February.
    14. Muhammad Hamza Khan & Muhammad Rizwan *, 2021. "The Impact of Stock Price Crash Risk on the Cost of Capital: Empirical Study from China," Journal of Economic Impact, Science Impact Publishers, vol. 3(2), pages 88-97.
    15. Li, Yinan & Liu, Qiang & Guo, Shuxin, 2025. "Ambiguity and stock price crash risk: Evidence from China," The North American Journal of Economics and Finance, Elsevier, vol. 79(C).
    16. San, Ziyao & Wang, Shuai & Xiu, Zongfeng & Zhou, Ling & Zhou, Zejiang, 2025. "Political control, corporate governance and stock-price crash risk: Evidence from China," Emerging Markets Review, Elsevier, vol. 65(C).
    17. Zaman, Rashid & Atawnah, Nader & Haseeb, Muhammad & Nadeem, Muhammad & Irfan, Saadia, 2021. "Does corporate eco-innovation affect stock price crash risk?," The British Accounting Review, Elsevier, vol. 53(5).
    18. Bai, Min & Xu, Limin & Yu, Chia-Feng (Jeffrey) & Zurbruegg, Ralf, 2020. "Superstition and stock price crash risk," Pacific-Basin Finance Journal, Elsevier, vol. 60(C).
    19. Chen, Yangyang & Fan, Qingliang & Yang, Xin & Zolotoy, Leon, 2021. "CEO early-life disaster experience and stock price crash risk," Journal of Corporate Finance, Elsevier, vol. 68(C).
    20. Huang, Shoujun & Liu, Hezhe, 2021. "Impact of COVID-19 on stock price crash risk: Evidence from Chinese energy firms," Energy Economics, Elsevier, vol. 101(C).

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:ijcgvn:v:15:y:2022:i:2:p:149-169. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.