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The Use of Derivatives as a Risk Management Instrument: Evidence from Indonesian Non-Financial Firms

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  • I Wayan Nuka Lantara

    (Faculty of Economics and Business, Universitas Gadjah Mada, Indonesia)

Abstract

This paper provides empirical evidence of firm-specific factors determining the decision to use derivatives and the level of usage for the case of Indonesia. The findings show that the participation rate in the use of derivatives is 15.8%, much lower compared to those found in developed countries. Using Probit and Tobit regression models, the results indicate that the use of derivatives is positively associated with firm size, market-to-book value, bank-firm relationship, and the involvement of the firm in foreign business activity, but negatively linked to liquidity.

Suggested Citation

  • I Wayan Nuka Lantara, 2012. "The Use of Derivatives as a Risk Management Instrument: Evidence from Indonesian Non-Financial Firms," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 11(1), pages 45-62, June.
    • Handle: RePEc:ijb:journl:v:11:y:2012:i:1:p:45-62
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    References listed on IDEAS

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    Cited by:

    1. Md Kamal Hossain & Mammadova Gulay, 2020. "Impact of Foreign Currency Derivatives on Value of Chinese Non-financial firms," Journal of Scientific Reports, IJSAB International, vol. 2(1), pages 78-96.

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    More about this item

    Keywords

    derivatives; risk management; hedging;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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