This study aims to examine the effect of sustainability report quality (SRQ) on information risk. This research also aims to examine the effect of SRQ on stock market participation through information risk.
The research sample includes 120 firm-years listed on the Sri Kehati Index period of 2017–2021. The hypothesis test uses firm and industry effect regression analysis. SRQ is measured by the existence of a sustainability committee and external assurance. The information risk is measured by bid-ask spread. Stock market participation is measured by volume of stock trading.
Based on the data analysis, this investigation finds that SRQ reduces information risk. This research also finds that SRQ improves stock market participation by reducing information risk.
First, this examination gives new evidence of SRQ to promote information environment improvement. Second, this examination contributes to providing the role of SRQ in an emerging market, such as Indonesia. Third, this examination contributes to providing the evaluation standard for sustainability reporting quality in Indonesia, since Indonesia has no specific standard for the sustainability report. Fourth, this examination contributes to filling the previous gap.
