Public Ownership Structure

Oct 13, 2025 by talynt.org 87 views

Factors Affecting Disclosure of Risk Management in Construction Companies on the Indonesian Stock Exchange

Introduction

The construction industry is a vital sector in the Indonesian economy, contributing significantly to the country's GDP. However, the industry is also prone to various risks, such as project delays, cost overruns, and changes in market conditions. To mitigate these risks, construction companies must have effective risk management strategies in place. One crucial aspect of risk management is disclosure, which refers to the transparency and openness of a company's risk management practices. In this study, we aim to identify and analyze the factors that influence the disclosure of risk management in construction companies listed on the Indonesia Stock Exchange (IDX).

Background

Risk management disclosure is a critical aspect of corporate governance, as it enables stakeholders to make informed decisions about their investments. In Indonesia, the IDX requires listed companies to disclose their risk management practices in their annual reports. However, the extent of risk management disclosure varies among companies, and there is a need to understand the factors that influence this disclosure.

Methodology

This study used a quantitative approach, employing multiple linear regression analysis with panel data. The population consisted of 11 registered construction companies listed on the IDX during the 2015-2019 period. The sample was selected using purposive sampling techniques, with 10 companies meeting the specified criteria. The data were obtained from the official website of the IDX and secondary sources.

Factors Affecting Risk Management Disclosure

Our study identified several factors that influence risk management disclosure in construction companies listed on the IDX. These factors are discussed below:

Level of Leverage

The level of leverage has a positive and significant influence on risk management disclosure. This may be due to the company's need to provide more information to stakeholders regarding risks associated with high debt. Companies with high leverage may be more transparent in their risk management disclosure to mitigate potential risks and maintain investor confidence.

Profitability

Profitability also shows a positive and significant effect on risk management disclosure. Companies that are more profitable tend to be more transparent in their risk management disclosure, as they have more resources to manage risk and report relevant information to investors. This is consistent with the idea that profitable companies are more likely to invest in risk management and disclosure practices.

Company Size

Company size has a positive but not significant effect on risk management disclosure. This is understandable, considering that large companies often have more resources to invest in risk management and disclosure practices. However, this does not necessarily guarantee broad disclosure of information, as large companies may still prioritize their own interests over transparency.

Public Ownership Structure

The structure of public ownership shows a positive but insignificant influence on risk management disclosure. This suggests that even though companies have public ownership, they do not always have a direct impact on their risk management disclosure policies. This may be due to the fact that public ownership does not necessarily translate to greater transparency and accountability.

Liquidity Level

Finally, the level of liquidity shows a positive influence that is also not significant. This suggests that high liquidity does not always contribute to better disclosure of risk management. This may be due to the fact that companies with high liquidity may not feel the need to disclose their risk management practices as extensively, as they may be less concerned about potential risks.

Conclusion

The findings of this study provide important insights for construction companies in Indonesia in terms of risk management disclosure. Companies must realize the importance of transparent disclosures, not only to meet regulations but also to increase investor confidence and attract more investments. Paying attention to influential factors, such as the level of leverage and profitability, can be a key for companies in designing more effective communication strategies regarding their risk management.

Implications

The results of this study have several implications for construction companies, regulators, and investors. Firstly, companies must prioritize risk management disclosure as a critical aspect of their corporate governance practices. Secondly, regulators must ensure that listed companies comply with risk management disclosure requirements and provide adequate guidance on the extent of disclosure. Finally, investors must be aware of the factors that influence risk management disclosure and make informed decisions based on this information.

Limitations

This study has several limitations that must be acknowledged. Firstly, the sample size is relatively small, and the study only focuses on construction companies listed on the IDX. Secondly, the study uses secondary data, which may not be comprehensive or up-to-date. Finally, the study only examines the factors that influence risk management disclosure and does not provide a comprehensive analysis of the risks faced by construction companies.

Future Research Directions

This study provides a foundation for future research on risk management disclosure in construction companies. Some potential research directions include:

Examining the impact of risk management disclosure on investor confidence and investment decisions
Investigating the role of corporate governance practices in risk management disclosure
Analyzing the effect of regulatory requirements on risk management disclosure
Exploring the relationship between risk management disclosure and company performance

By addressing these research gaps, future studies can provide a more comprehensive understanding of risk management disclosure in construction companies and inform policy and practice in this area.
Frequently Asked Questions (FAQs) on Factors Affecting Disclosure of Risk Management in Construction Companies on the Indonesian Stock Exchange

Q: What is risk management disclosure, and why is it important for construction companies?

A: Risk management disclosure refers to the transparency and openness of a company's risk management practices. It is essential for construction companies to disclose their risk management practices to stakeholders, including investors, customers, and employees, to ensure that they are aware of the potential risks and can make informed decisions.

Q: What are the factors that influence risk management disclosure in construction companies?

A: Our study identified several factors that influence risk management disclosure in construction companies, including:

Level of leverage: Companies with high leverage may be more transparent in their risk management disclosure to mitigate potential risks and maintain investor confidence.
Profitability: Profitable companies tend to be more transparent in their risk management disclosure, as they have more resources to manage risk and report relevant information to investors.
Company size: Large companies may have more resources to invest in risk management and disclosure practices, but this does not necessarily guarantee broad disclosure of information.
Public ownership structure: Public ownership does not necessarily translate to greater transparency and accountability.
Liquidity level: High liquidity does not always contribute to better disclosure of risk management.

Q: Why is it essential for construction companies to disclose their risk management practices?

A: Disclosure of risk management practices is crucial for construction companies to maintain investor confidence, attract more investments, and ensure that stakeholders are aware of the potential risks. It also helps companies to identify and mitigate potential risks, which can lead to better decision-making and improved performance.

Q: How can construction companies improve their risk management disclosure practices?

A: Construction companies can improve their risk management disclosure practices by:

Providing clear and concise information about their risk management practices
Identifying and disclosing potential risks and mitigating measures
Establishing a risk management committee to oversee risk management practices
Conducting regular risk assessments and updating risk management plans
Ensuring that risk management practices are aligned with company goals and objectives

Q: What are the implications of this study for regulators and policymakers?

A: The findings of this study have several implications for regulators and policymakers, including:

Ensuring that listed companies comply with risk management disclosure requirements
Providing adequate guidance on the extent of disclosure
Encouraging companies to prioritize risk management disclosure as a critical aspect of corporate governance practices

Q: What are the limitations of this study, and what are the potential research directions?

A: This study has several limitations, including a small sample size and the use of secondary data. Potential research directions include:

Examining the impact of risk management disclosure on investor confidence and investment decisions
Investigating the role of corporate governance practices in risk management disclosure
Analyzing the effect of regulatory requirements on risk management disclosure
Exploring the relationship between risk management disclosure and company performance

Q: How can investors use this information to make informed decisions?

A: Investors can use this information to make informed decisions by:

Evaluating the risk management practices of construction companies
Assessing the level of transparency and disclosure of risk management practices
Considering the potential risks and mitigating measures of construction companies
Making informed decisions based on the analysis of risk management practices and potential risks.