Does the Inclusion of Indonesian Firms in a Sustainable and Responsible Investment Index Affect Stock Performance?

Abstract

This study empirically investigates the effect of the addition of Indonesian firms in the sustainable and responsible investment index (SRI-KEHATI index) on stock performance. This study applies an event study methodology using a single index model. The empirical results reveal that there are two days with significant abnormal returns, namely d+1 and d+3. This finding implies that the Indonesian stock market is efficient in semi-strong form. This study also finds that there is no difference in abnormal returns before and after the SKI announcement. The implication of this study is the investors do not have to consider their investment decisions based on the inclusion of a corporation in the SKI.