The Preferences of Non-governmental Organizations to Sustainable Investment: Evidence From Emerging Equity Market

Abstract

Purpose: From December 2015 to August 2018, the shares ownership of NGOs in the Indonesian equity market growing more than 80% for domestic and 120% for foreign. This study is aim to empirically test the NGO investment preferences in the Indonesia Stock Exchange based on the unique data set of free float shares ownership by NGOs in Indonesia Stock Exchange. The authors identify the impact of the firm size, firm liquidity level and recognition of sustainability as factors that imply the preferences of the foreign NGOs ownership in the Indonesia equity market. Design/Methodology/Approach: A new dataset from Indonesia evidence addresses insight of the importance to analyze the preference of NGO investors’ ownership in the stock market. In this study, the researchers examine two models to test the impact of market capitalization, liquidity and recognition of sustainability on the subsequent of NGO shares ownership. The analysis of stock ownership model performs by ordinary-least-squares (OLS) regression approach. Robustness test confirmed that the data do not contain any of window dressing and trade discreteness effects. Findings: The main result of this study shows that foreign NGO prefers to hold more ownership on the firms with recognition of sustainability. There were also found that foreign NGOs prefers to holdings fewer variety stocks, bigger market capitalization compared to domestic NGOs. Implications/Originality/Value: This study contributes to the debate of the important role of NGOs to foster a better investment environment in the emerging equity market. It also may help Indonesia Stock Exchange and Indonesia Financial Services Authority in making regulation and laws concerning NGOs role that significant to the sustainable investment improvement in the equity market

Keywords

• NGO Investment
• Ownership
• Preference
• SRI
• Indonesia Stock Exchange