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All Journal The Indonesian Journal of Accounting Research
Navara Wahyu Firdausi
Universitas Negeri Semarang
Economics, Econometrics & Finance

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Does Board Size Moderate the Impact of ESG Controversies on Stock Return Volatility? Evidence from Indonesia Navara Wahyu Firdausi; Badingatus Solikhah
The Indonesian Journal of Accounting Research Vol 29, No 3 (2026): IJAR September 2026 in Progress
Publisher : The Indonesian Journal of Accounting Research

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.33312/ijar.1052

Abstract

This study analyzes the relationships between Environmental, Social, and Governance (ESG) scores, ESG controversies, and board gender diversity with board size as a moderator, and examines their effects on stock return volatility. The primary purpose of this study is to examine whether ESG controversies increase stock return volatility, as well as to determine whether board size moderates this relationship by either strengthening or weakening it. This study employed panel data regression to analyze 4,180 firm-year observations on non-financial firms listed on the Indonesia Stock Exchange during 2020-2024. We analyzed data from the Refinitiv database using regression, correlation, descriptive statistics, and interaction-term analysis. The results demonstrated that higher ESG scores and board gender diversity significantly reduced stock return volatility, whereas ESG controversy appeared to have no significant effect. Board size mitigated the negative impact of ESG controversies on volatility whilst simultaneously strengthening the effectiveness of gender diversity in reducing market risk. This study showcases the importance of mitigating ESG-related investment risks and anticipating the adverse effects of corporate controversies. It also provides guidance to management on determining the optimal board structure to maintain effective decision-making in a dynamic market.
Co-Authors Badingatus Solikhah