The Effect of the COVID-19 Pandemic on Corporate Risk and ESG Performance as Moderating Variable

Ramadhian Scholars Ekaputra; Debi Nur Afifah; Edwin Bakken

Ramadhian Scholars Ekaputra
Debi Nur Afifah
Edwin Bakken

Abstract

This study aims to examine the effect of the Covid-19 pandemic on corporate Risk proxied as total Risk, Systematic Risk, and nonsystematic Risk (idiosyncratic) with ESG performance (environmental, social, and governance) as a moderating variable. This study took a sample of companies listed on the IDX in the Kompas100 index from 2018 to 2020. The results of this test show a positive influence of the Covid-19 pandemic on corporate Risk as measured by total Risk, Systematic Risk, and nonsystematic Risk. Then this test shows that ESG performance, both in combination and components, namely environmental performance (E) and governance performance (G), is proven to significantly weaken the positive relationship of the Covid-19 pandemic to total Risk and Systematic Risk, but insignificant to the company's nonsystematic Risk. In the ESG component, environmental performance (E) has the best coefficient and significantly weakens the positive relationship of the Covid-19 pandemic to all three risks, namely total Risk, Systematic Risk, and nonsystematic Risk. However, only social performance (S) was found to be insignificant in this study, weakening the relationship between the independent and dependent variables.

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