MARKET REACTION TO ESG DISCLOSURES:EVIDENCE FROM FINANCIAL FIRMS IN INDONESIA

This study analyzes environmental, social, and governance (ESG) disclosures on market reactions in financial firms listed on the Indonesia Stock Exchange. Using a causal-comparative approach, this research examines panel data from all financial firms in Indonesia. ESG performance is collected manually based on the Global Reporting Initiative (GRI) indicator, while Tobin's Q reflects market reaction. The analysis is conducted in stages using a panel data regression model, including Pooled OLS and Random Effect, which are first tested for model specifications. The test results indicate that investors have not integrated ESG information into investment decision-making. In contrast, financial indicators at the firm level play a significant positive role. In this instance, investors incorporate more traditional financial information into financial decision-making than sustainable information. These results remain robust when tested using the generalized method of moments modeling and the propensity score matching method. This study offers valuable insights for researchers, investors, regulators, and firms regarding the role of ESG in developing countries.