The Effect Of The Disclosure Of Sustainability Reports, Profitability, And Company Size On Stock Prices In Non -financial Companies Listed On The Indonesia Stock Exchange

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The Effect of Disclosure of Sustainability Report, Profitability, and Company Size on Stock Prices in Non-Financial Companies Listed on the Indonesia Stock Exchange

Introduction

The stock market is a complex and dynamic system, influenced by various factors that can impact stock prices. In non-financial companies listed on the Indonesia Stock Exchange, understanding the dynamics of stock prices is crucial for investors, company management, and regulators. This study aims to investigate the effect of disclosure of sustainability reports, profitability, and company size on stock prices in non-financial companies listed on the Indonesia Stock Exchange.

Research Background

The population of this study includes 25 non-financial companies that actively publish sustainability reports. By using the saturated sampling method, all companies in the population are included as samples. The data analysis technique applied is multiple linear regression, which provides in-depth insight into the relationship between the variables studied.

The Importance of Sustainability Reports

Sustainability reports have become an essential tool for companies to demonstrate their commitment to social and environmental responsibility. However, the effectiveness of sustainability reports in influencing stock prices remains unclear. This study aims to investigate the impact of sustainability reports on stock prices, specifically in non-financial companies listed on the Indonesia Stock Exchange.

The Role of Profitability

Profitability is a critical factor in determining stock prices. Return on Equity (ROE) is a widely used metric to measure a company's profitability. This study aims to investigate the relationship between ROE and stock prices in non-financial companies listed on the Indonesia Stock Exchange.

The Impact of Company Size

Company size is another factor that can influence stock prices. Larger companies tend to have more market capitalization, which can impact stock prices. This study aims to investigate the relationship between company size and stock prices in non-financial companies listed on the Indonesia Stock Exchange.

Methodology

The data used in this study are quantitative, taken from audited financial statements and sustainability reports published by the company during the 2016 to 2017 period. The saturated sampling method is used to select all companies in the population as samples. Multiple linear regression is applied to analyze the relationship between the variables studied.

Main Research Findings

The results showed that the variable disclosure of sustainability report in the economic and environmental category and company size had a positive influence, but insignificant, on stock prices. Conversely, the profitability measured through ROE shows a positive and significant effect. This indicates that ROE is a performance indicator that is more relevant in determining the value of the company's shares compared to the disclosure of sustainability.

Interestingly, the disclosure of sustainability reports in the social category actually shows negative and insignificant influence on stock prices. This finding could have triggered further discussions about investor perceptions of the social aspects of the sustainability reported by the company. It is possible that investors appear more focused on the company's financial performance and competitiveness than the social issues submitted in the report.

Analysis and Implications

From the point of view of investors, the results of this study show the importance of greater attention to profitability as a key indicator in making investment decisions. Although the disclosure of sustainability is important to demonstrate the company's commitment to social and environmental responsibility, the essence of financial returns remains a top priority for investors.

For company management, this research provides critical insights on what is more valued by the market. Instead of only focusing on social disclosure that may not be very valued by investors, companies need to emphasize the achievement of solid and sustainable financial performance in their reports.

Conclusion

Overall, this study made a significant contribution to the understanding of the factors that affect stock prices in non-financial companies in Indonesia. The importance of ROE as the main driver of stock prices highlights the need for companies to optimize their financial performance. Meanwhile, the disclosure of sustainability remains an aspect that needs to be considered, but its effectiveness must be harmonized with the interests and expectations of shareholders. Thus, companies are expected to be able to take advantage of the results of this study to improve their communication and reporting strategies, so as to attract better investors and encourage sustainable growth.

Recommendations

Based on the findings of this study, the following recommendations are made:

  1. Companies should prioritize financial performance: Companies should focus on achieving solid and sustainable financial performance, as this is a key indicator in making investment decisions.
  2. Sustainability reports should be aligned with investor expectations: Companies should ensure that their sustainability reports are aligned with the interests and expectations of shareholders.
  3. Investors should consider multiple factors: Investors should consider multiple factors, including financial performance, sustainability reports, and company size, when making investment decisions.

Limitations

This study has several limitations, including:

  1. Limited sample size: The sample size of this study is limited to 25 non-financial companies listed on the Indonesia Stock Exchange.
  2. Data availability: The data used in this study are limited to audited financial statements and sustainability reports published by the company during the 2016 to 2017 period.
  3. Methodological limitations: The multiple linear regression method used in this study may have limitations in capturing the complex relationships between the variables studied.

Future Research Directions

Future research should aim to:

  1. Investigate the impact of sustainability reports on stock prices in other industries: This study focused on non-financial companies listed on the Indonesia Stock Exchange. Future research should investigate the impact of sustainability reports on stock prices in other industries.
  2. Examine the relationship between sustainability reports and financial performance: This study found that sustainability reports have a positive and significant effect on stock prices. Future research should examine the relationship between sustainability reports and financial performance.
  3. Investigate the impact of company size on stock prices: This study found that company size has a positive influence, but insignificant, on stock prices. Future research should investigate the impact of company size on stock prices in other industries.
    Frequently Asked Questions (FAQs) on the Effect of Disclosure of Sustainability Report, Profitability, and Company Size on Stock Prices in Non-Financial Companies Listed on the Indonesia Stock Exchange

Q: What is the main objective of this study? A: The main objective of this study is to investigate the effect of disclosure of sustainability reports, profitability, and company size on stock prices in non-financial companies listed on the Indonesia Stock Exchange.

Q: What is the population of this study? A: The population of this study includes 25 non-financial companies that actively publish sustainability reports.

Q: What is the data analysis technique applied in this study? A: The data analysis technique applied in this study is multiple linear regression, which provides in-depth insight into the relationship between the variables studied.

Q: What is the main finding of this study? A: The main finding of this study is that the variable disclosure of sustainability report in the economic and environmental category and company size had a positive influence, but insignificant, on stock prices. Conversely, the profitability measured through ROE shows a positive and significant effect.

Q: What is the implication of this study for investors? A: The implication of this study for investors is that they should give greater attention to profitability as a key indicator in making investment decisions. Although the disclosure of sustainability is important to demonstrate the company's commitment to social and environmental responsibility, the essence of financial returns remains a top priority for investors.

Q: What is the implication of this study for company management? A: The implication of this study for company management is that they should prioritize financial performance and emphasize the achievement of solid and sustainable financial performance in their reports.

Q: What are the limitations of this study? A: The limitations of this study include:

  1. Limited sample size: The sample size of this study is limited to 25 non-financial companies listed on the Indonesia Stock Exchange.
  2. Data availability: The data used in this study are limited to audited financial statements and sustainability reports published by the company during the 2016 to 2017 period.
  3. Methodological limitations: The multiple linear regression method used in this study may have limitations in capturing the complex relationships between the variables studied.

Q: What are the future research directions? A: Future research should aim to:

  1. Investigate the impact of sustainability reports on stock prices in other industries: This study focused on non-financial companies listed on the Indonesia Stock Exchange. Future research should investigate the impact of sustainability reports on stock prices in other industries.
  2. Examine the relationship between sustainability reports and financial performance: This study found that sustainability reports have a positive and significant effect on stock prices. Future research should examine the relationship between sustainability reports and financial performance.
  3. Investigate the impact of company size on stock prices: This study found that company size has a positive influence, but insignificant, on stock prices. Future research should investigate the impact of company size on stock prices in other industries.

Q: What are the practical implications of this study? A: The practical implications of this study are that companies should prioritize financial performance and emphasize the achievement of solid and sustainable financial performance in their reports. Investors should also consider multiple factors, including financial performance, sustainability reports, and company size, when making investment decisions.

Q: What are the theoretical implications of this study? A: The theoretical implications of this study are that the disclosure of sustainability reports has a positive and significant effect on stock prices, but the effect is more pronounced when combined with financial performance. This study also highlights the importance of considering multiple factors when making investment decisions.

Q: What are the policy implications of this study? A: The policy implications of this study are that regulatory bodies should consider the importance of financial performance and sustainability reports when making policy decisions. Companies should also be encouraged to prioritize financial performance and emphasize the achievement of solid and sustainable financial performance in their reports.