ESG Performance and Stock Returns: The Roles of Investor Attention and Information Environment in Indonesia’s Mining Sector

Abstract

This study examines whether investor attention and the market information environment transmit environmental, social, and governance (ESG) information into stock returns. The analysis employs a balanced panel of 31 mining companies listed on the Indonesia Stock Exchange from 2019 to 2023, comprising 155 firm-year observations. ESG performance is measured using an external ESG score, investor attention is proxied by the Google Search Volume Index, and the information environment is captured inversely by the relative bid–ask spread. Firm fixed-effects models with heteroskedasticity-robust standard errors clustered at the firm level are estimated for the investor-attention, spread, and stock-return equations. Indirect effects are assessed using 5000 firm-level cluster-bootstrap replications. The results show that ESG performance is not significantly associated with contemporaneous stock returns. ESG is positively but only marginally associated with investor attention and significantly associated with a narrower relative bid–ask spread, indicating a more favourable information environment. Investor attention and the relative spread are significantly associated with stock returns. However, neither the attention-mediated effect nor the spread-mediated effect is statistically significant. These findings distinguish ESG signal recognition from signal pricing, showing that ESG information can influence investor attention and the market information environment without forming a statistically significant transmission mechanism to contemporaneous stock returns.