Geopolitical Risk, Oil Price Exposure, and Firm's Tail Risk: Evidence From Expected Shortfall Analysis of Kompas 100 Constituents

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Jusuf, Cheryl (2026) Geopolitical Risk, Oil Price Exposure, and Firm's Tail Risk: Evidence From Expected Shortfall Analysis of Kompas 100 Constituents. Diploma thesis, IPMI Institute.

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Abstract

This study investigates the influence of geopolitical risk, energy exposure, and firm cost structure on the equity tail risk of non-financial companies listed on the Indonesia Stock Exchange during 2015–2025. Tail risk is measured through Expected Shortfall at the fifth percentile (ES5), computed from daily returns as the mean of the worst five percent of trading days. Two variables are constructed for this study: Geopolitical Energy-Adjusted Risk (GEAR), which weights the annual change in a three-benchmark composite crude oil price by Indonesia’s Middle East share of petroleum imports, and Firm Exposure (EXPO), measured as cost of goods sold to net sales, which also serves as the moderating variable. The Geopolitical Risk Index enters as a second geopolitical measure and return on assets as a control. Estimation is on 54 firms and 594 firm-year observations. Geopolitical risk, energy exposure and cost intensity each come out negative against tail risk, the energy estimate consistently so across specifications and the other two with less security, which means that in years of higher geopolitical tension the extreme losses recorded across the sample were milder rather than deeper. Two features of the setting offer a plausible reading of that pattern, though neither is tested directly. The Indonesian listed market is composed largely of commodity-linked issuers, and Indonesia both produces and imports oil, so a price increase arrives as cost for some firms and as revenue for others. On cost structure, the negative coefficient is compatible with a cost-flexibility reading of Firm Exposure (EXPO) rather than the reading under which a high cost ratio simply means a thin operating margin, though the evidence does not settle the question. Cost structure was also tested as a moderator of the geopolitical energy channel and no moderation was detected. Whether an energy shock helps or harms a firm may turn on which side of the income statement it lands on, and that remains to be tested at the industry level.

Keywords: Expected Shortfall, Geopolitical Risk, Geopolitical Energy-Adjusted Risk, Firm Cost Exposure, Operating Leverage, Panel Data Regression, Kompas 100, Indonesia Stock Exchange

Item Type:	Thesis (Diploma)
Subjects:	H Social Sciences > H Social Sciences (General)
Divisions:	Thesis > Bachelor of Business Administration
Depositing User:	sandra margaretha
Date Deposited:	29 Sep 2026 09:20
Last Modified:	29 Sep 2026 09:20
URI:	http://repository.ipmi.ac.id/id/eprint/3055

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