A 2026 study by Novia Hanida M, Cipto Wardoyo, and Rizky Formansyah from Universitas Negeri Malang reveals that firm-specific stock volatility is positively associated with the financial stability of energy companies in Indonesia. The finding challenges the common assumption that higher risk inevitably weakens a company’s financial condition.
In recent years, Indonesia’s energy sector has faced significant pressure from global market fluctuations, currency depreciation, and stock price instability. However, companies have responded differently depending on their financial performance, management quality, and corporate governance practices.
The study examined 42 energy companies listed on the Indonesia Stock Exchange over the 2018–2024 period. Data were collected from company reports and financial market sources, then analyzed using a structural statistical model. Firm-specific risk was measured through stock return volatility, while financial stability was assessed using the Altman Z-score, a widely used indicator of corporate financial health.
Key findings include:
- Idiosyncratic volatility has a statistically significant effect on financial stability
- The relationship is positive, contradicting the initial hypothesis
- The effect size is relatively small, explaining only about 6% of financial stability variation
- Most financial stability is influenced by other external and internal factors
These results indicate that rising firm-specific risk does not automatically lead to financial instability. Companies with strong fundamentals can remain stable despite experiencing high levels of stock volatility.
Novia Hanida explains that volatility does not always reflect internal weakness. It often represents how the market reacts to new information rather than the company’s actual financial condition. This highlights the importance of investor perception and information dynamics in shaping stock price movements.
The implications are broad. For investors, stock fluctuations should not always be interpreted as negative signals. For companies, maintaining strong financial fundamentals is essential to withstand market turbulence. For policymakers, the findings emphasize the importance of transparency to reduce market misinterpretation.
Author Profile
- Novia Hanida M - Universitas Negeri Malang
- Cipto Wardoyo -Universitas Negeri Malang
- Rizky Formansyah -Universitas Negeri Malang
Source
Hanida, N. M., Wardoyo, C., & Formansyah, R. (2026). The Effect of Idiosyncratic Volatility on Corporate Financial Stability: Empirical Evidence on Energy Companies in Indonesia. International Journal of Education and Life Sciences (IJELS), Vol. 4 No. 3, pp. 263–272.
0 Komentar