THE IMPACT OF CARBON RISK ON STOCK RETURNS AND VOLATILITY: THE MODERATING ROLE OF ENVIRONMENTAL INNOVATION
DOI:
https://doi.org/10.15575/jim.v7i2.59376Keywords:
Carbon Risk, Stock Performance, Environment Innovation , Stock Return, Stock Volatility.Abstract
The growing carbon risks Indonesian businesses confront as the nation moves toward a low carbon economy are the driving force behind this study. Increased regulatory expenses, reputational hazards, and market uncertainty are some of the ways that carbon concerns can impact stock performance. The purpose of this study is to examine how carbon hazards affect stock returns and stock volatility and to determine whether environmental innovation plays a moderating function. Using secondary data from 76 businesses listed on the IDX between 2016 and 2024 a total 474 observations, the study takes a quantitative approach. Panel data regression was used to analyse the data, and control variables included ROA, ROE, company size, market capitalisation, and leverage. The findings show that stock returns and stock volatility are positively and significantly impacted by carbon risk. Additionally, it was discovered that while environmental innovation had moderate effect on stock volatility, it also weaken the impact of carbon risk on stock returns. These results imply that one important tactic for reducing the effects of carbon risk and boosting investor confidence is environmental innovation. In order to assist carbon risk management and the sustainability of Indonesia’s capital market, this study has implications for businesses, investors, and regulators.
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