<![CDATA[Purpose – This study aims to analyze investor reactions to changes in the SRI-KEHATI Index composition, particularly the addition and removal of stocks, as a representation of market responses toward sustainable investment signals in Indonesia. Design/methodology/approach – This quantitative study employs an event study method with an 11-day observation window (t–5 to t+5). The sample consists of 42 stocks affected by SRI-KEHATI Index composition changes during five evaluation periods from 2022–2024. Market reaction is measured using Cumulative Average Abnormal Return (CAAR). Findings – The results indicate that stocks added to the SRI-KEHATI Index generate positive CAAR, reflecting positive investor sentiment and increased buying activity. Conversely, removed stocks experience negative CAAR, indicating unfavorable market reactions and selling pressure. These findings support signaling theory, demonstrating that ESG index inclusion and exclusion provide meaningful information for investors. Originality/value – This study contributes to sustainable finance and capital market literature by demonstrating how ESG index revisions influence investor perceptions and trading behavior in an emerging market context. The findings highlight the strategic role of ESG indices as market signals in shaping investment decisions. ]]>
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