ESG Risk and Firm Value: The Role of Materiality in Sustainability Reporting

Eriandani, Rizky and Winarno, Wahyu Agus (2024) ESG Risk and Firm Value: The Role of Materiality in Sustainability Reporting. Quality Innovation Prosperity (QIP), 28 (2). pp. 16-34. ISSN 1335-1745; E-ISSN 1338-984X

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Abstract

Purpose:This research aims to investigate the impact of environmental, social, and governance (ESG)risk on firm value and analyse the disclosure of materiality as a moderation variable. Methodology/Approach:We select research data through purposive sampling. We obtain ESG risk scores from Sustainalytics. Content analysis measures the materiality of sustainability disclosures. We processed 204 company data sets in Indonesia using moderated regression analysis techniques between 2020 and 2022. Findings:Empirical results show that greater environmental, social, and governance risks will lower firm value. Furthermore, the disclosure of materiality in the sustainability report can moderate the negative impact of ESG risk on the firm'svalue. Research Limitation/Implication:This research's implications are essential for standard-makers and governments to increase corporate attention toenvironmental, social, and governance risk aspects. The company's operations pose ESG risk, which negatively impacts market value as investors rely on this information for their decision-making. Furthermore, this research also implies that management understands the importance of materiality in sustainability reports. Originality/Value of paper:This research enriches existing literature on corporate risk, focusing on environmental, social, and governance risks. This paper also adds references to materiality disclosure in sustainability reports.

Item Type:	Article
Uncontrolled Keywords:	firm risk; ESG risk; materiality; disclosure; firm value
Subjects:	H Social Sciences > H Social Sciences (General) H Social Sciences > HF Commerce > HF5601 Accounting
Divisions:	Faculty of Business and Economic > Department of Accounting
Depositing User:	RIZKY ERIANDANI M.Ak. - 209174
Date Deposited:	01 Aug 2024 03:05
Last Modified:	01 Aug 2024 03:05
URI:	http://repository.ubaya.ac.id/id/eprint/46806

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