DETERMINANTS OF FOREIGN CURRENCY HEDGING AND IT’S IMPACT ON FIRM VALUE
Abstract
Hedging through derivative instruments is a risk management action to reduce losses due to foreign exchange exposure. This research aims to examine the influence of liquidity, company size, leverage, growth opportunity, financial distress, profitability on company hedging decisions and to find out whether hedging activities have an effect on company value. The research sample consisted of 39 companies in the basic industry and chemical goods sector listed on the Indonesia Stock Exchange in 2014-2018. This research uses two stages of testing to analyze the data. The first stage uses logistic regression to test decision determinants hedging company. The second stage uses testing Independent Sample T-Test to determine the impact of activities hedging on company value and knowing which groups of companies have superior value. The research results show that leverage, company size and growth opportunity have a positive effect on the probability of a company's hedging decisions. Meanwhile, financial distress, liquidity and profitability have a negative effect on the probability of a company's hedging decisions. There is a significant difference in the average value between companies that carry out hedging activities and companies that do not carry out hedging activities.
Keywords
Full Text:
PDFReferences
Adenle, A., Boillat, S., & Speranza, C. (2022). Key dimensions of land users’ perceptions of land degradation and sustainable land management in Niger State, Nigeria. Environmental Challenges, 8, 100544.
Admasu, W. F., Passel, S. V, Minale, A. S., Tsegaye, E. A., Azadi, H., & Nyssen, J. (2019). Take out the farmer: An economic assessment of land expropriation for urban expansion in Bahir Dar, Northwest Ethiopia. Land Use Policy, 87, 104038.
Afsar, J., Chaudhary, G. M., Iqbal, Z., & Aamir, M. (2018). Impact of Financial Literacy and Parental Socialization on the Saving Behavior of University Level Students. Journal of Accounting and Finance in Emerging Economies, 4(2), 133–140. https://doi.org/https://doi.org/10.26710/jafee.v4i2.526
Afza, T., & Alam, A. (2011). Corporate derivatives and foreign exchange risk management: A case study of non‐financial firms of Pakistan. Journal of Risk Finance, 12(5), 409–420.
Allayannis, G., & Ofek, E. (2001). Exchange Rate Exposure, Hedging and The Use of Foreign Currency Derivatives. Journal of International Money and Finance, 20(2), 273–296.
Ameer, R. (2010). Determinant of Corporate Hedging Practices in Malaysia. International Business Research, 3(2), 120–130.
Finajina, A. T., Fadah, I., & Singgih, M. (2014). Analisis Hedging Strategy Pada Utang Luar Negeri Negara Madagascar. In Artikel ilmiah Mahasiswa. Universitas Jember.
Graham, J. R., & Rogers, D. A. (2002). Do Firms Hedge in Response to Tax Incentives? The Journal of Finance, 57(2), 815–839. https://doi.org/10.1111/1540-6261.00443
Guniarti, F. (2014). Faktor-faktor Yang Mempengaruhi Aktivitas Hedging Dengan Instrumen Derivatif Valuta Asing. Jurnal Dinamika Manajemen, 5(1), 64–79.
Harahap, S. S. (2007). Analisis Kritis atas Laporan Keuangan (Satu). Jakarta: Raja Grafindo Persada.
International Monetary Fund. (1998). Indonesia—Memorandum of Economic and Financial Policies. https://www.imf.org/external/np/loi/011598.HTM#:~:text=By end-December 1997%2C Indonesia’s,exports of goods and services.
Kasmir, K. (2016). Bank dan Lembaga Keuangan Lainnya (Cetakan ke). Jakarta: Raja Grafindo Persada.
Lesakova, L. (2007). Used and Limitations of Profitability Ratio Analysis in Managerial Practice. Proceedings-5th International Conference on Management, Enterprise and Benchmarking (MEB 2007), 36–48.
Lokobal, A., Sumajouw, M. D. J., & Sompie, B. F. (2014). Manajemen Risiko Pada Perusahaan Jasa Pelaksana Konstruksi Di Propinsi Papua (Study Kasus Di Kabupaten Sarmi). Jurnal Ilmiah Media Engineering, 4(2), 109–118.
Nguyen, H., & Faff, R. (2002). On The Determinants of Derivative Usage by Australian Companies. Australian Journal of Management, 27(1), 1–24.
Organ, D. W., Podsakoff, P. M., & MacKenzie, S. B. (2006). Organizational Citizenship Behavior: Its Nature, Antecedents, and Consequences. SAGE Publications, Inc.
Simorangkir, I., & Suseno, S. (2004). Sistem dan Kebijakan Nilai Tukar. Jakarta: Pusat Pendidikan dan Studi Kebanksentralan BI.
Stulz, & Karolyi. (1996). Why Do Market Move Together: an Investigation of U.S. – Japan Stock Return Co-movements. The Journal of Finance, 5(3).
Turok, I., & McGranahan, G. (2013). Urbanization and Economic Growth: The Arguments and Evidence for Africa and Asia. Environment and Urbanization, 24, 465–482.
Tyllianakis, E., & Ferrini, S. (2021). Personal attitudes and beliefs and willingness to pay to reduce marine plastic pollution in Indonesia. Marine Pollution Bulletin, 173(Part B), 1–11.
Vural-Yavas, C. (2016). Determinants of Corporate Hedging: Evidence from Emerging Market. International Journal of Economics and Financie, 8(12), 151.
Waqas, H., & Md-Rus, R. (2018). Predicting financial distress: Importance of accounting and firm-specific market variables for Pakistan’s listed firms. Cogent Economics and Finance, 6(1), 1–16. https://doi.org/https://doi.org/10.1080/23322039.2018.1545739
Xu, L., Wang, X., Liu, J., He, Y., Tang, J., Nguyen, M., & Cui, S. (2019). Identifying the trade-offs between climate change mitigation and adaptation in urban land use planning: An empirical study in a coastal city. Environment International, 133(Part B), 105162. https://doi.org/10.1016/j.envint.2019.105162
DOI: https://doi.org/10.20961/jaedc.v8i2.79839
Refbacks
- There are currently no refbacks.
Copyright (c) 2023 Amalia Hasna Fadhila, Riwi Sumantyo
This work is licensed under a Creative Commons Attribution 4.0 International License.
|