Financial Performance and Market Valuation under Geopolitical Sentiment: A Conceptual Framework of Boycott and Substitution Effects in Indonesia
Annisa Karimah *
Accounting Department, University of Lampung, Bandar Lampung, Indonesia.
Tri Joko Prasetyo
Accounting Department, University of Lampung, Bandar Lampung, Indonesia.
Usep Syaipudin
Accounting Department, University of Lampung, Bandar Lampung, Indonesia.
*Author to whom correspondence should be addressed.
Abstract
Background: The increasing escalation of geopolitical conflicts has transformed consumer boycott movements into a form of systemic economic pressure that significantly influences corporate financial performance and stock market valuation, particularly among multinational-affiliated firms operating in emerging markets such as Indonesia. In the Indonesian context, geopolitical boycott sentiment triggered by public and religious responses has created asymmetric market effects, where affiliated multinational firms experience financial deterioration while local substitute firms benefit from shifting consumer preferences and capital reallocation.
Aims: This conceptual article aims to examine how geopolitical sentiment, evolving into systemic risk, affects financial performance and market valuation dynamics of firms listed on the Indonesia Stock Exchange (IDX), particularly through boycott and substitution effects.
Study Design: The study adopts a conceptual research design by developing a theoretical framework grounded in Signaling Theory and Stakeholder Theory to explain the asymmetric impacts between multinational (affiliated) and local (substitution) firms. As a conceptual paper, this study does not apply statistical sampling techniques; instead, it conceptually focuses on publicly listed firms on the Indonesia Stock Exchange that are potentially exposed to geopolitical boycott sentiment, including multinational-affiliated firms and domestic substitute firms operating in related industries.
Place and Duration of Study: The study is situated within the Indonesia Stock Exchange context, using recent geopolitical developments as the underlying phenomenon.
Methodology: This study employs a qualitative conceptual approach by reviewing relevant literature and integrating theoretical perspectives to construct a comprehensive model. The framework identifies key financial indicators, including Total Asset Turnover (TATO), Cash Ratio, Debt to Equity Ratio (DER), and Price to Book Value (PBV), as channels through which geopolitical sentiment is transmitted.
Results: The study proposes that boycott sentiment exerts asymmetric effects. Affiliated firms are negatively impacted through declining asset efficiency, reduced liquidity, increased solvency risk, and lower market valuation. In contrast, substitution firms benefit from spillover consumption effects, which strengthen their financial fundamentals and enhance market valuation.
Contributions: The study concludes that geopolitical sentiment functions as a critical external risk factor influencing firm performance and valuation. It highlights managerial implications such as the importance of liquidity stress testing and cautious expansion strategies, while also recommending investors consider geopolitical risk as a screening indicator. The proposed conceptual model provides a foundation for future empirical quantitative research.
Keywords: Geopolitical boycott, financial performance, market valuation, substitution firms, systemic risk