The impact of boycott on financial sustainability : a causal machine learning analysis on the performance of Six-FMCG companies in the Indonesian capital market

Abstract

This study investigates the impact of consumer boycotts on the financial performance of leading companies in Indonesia's fast-moving consumer goods (FMCG) sector, where social and cultural issues play a critical role. Focusing on three boycotted firms; PT Unilever Indonesia Tbk (UNVR.JK), PT Fast Food Indonesia Tbk (FAST.JK), and PT Sarimelati Kencana Tbk (PZZA.JK) and comparing them with three non-boycotted firms; PT Indofood CBP Sukses Makmur Tbk (ICBP.JK), PT Mayora Indah Tbk (MYOR.JK), and PT Matahari Putra Prima Tbk (MPPA.JK). This research employs a twostage empirical approach. First, a Difference-in-Differences (DiD) econometric model is applied to estimate the causal impact of boycotts on stock prices by contrasting treated and untreated firms. Although DiD is widely used, it relies on strong assumptions such as linearity and parallel trends, which may not fully capture real-world complexities. To address this limitation, the second stage applies Causal Machine Learning, specifically Causal Forests, to estimate heterogeneous treatment effects and provide a flexible, nonparametric assessment of boycott impacts. The treatment period is defined based on the 2023 Indonesian Ulema Council (MUI) Fatwa advocating a boycott of products associated with Israel, which triggered significant consumer responses. The results show that boycotted firms experienced a statistically significant decline in stock performance, while non-boycotted firms remained stable or demonstrated modest growth. These findings underscore the substantial financial risks linked to consumer activism and highlight the importance of social perception in corporate sustainability. The study contributes to boycott economics literature by integrating econometric and machine learning methods in a developing market context, offering practical implications for corporate risk management, stakeholder engagement, and the necessity of maintaining social responsiveness in sensitive socio-political environments.