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The Determinants of Corporate Hedging Policy: A Case Study from Indonesia

Author

Listed:
  • Sugeng Wahyudi
  • Fernando Goklas
  • Maria Rio Rita
  • Hersugondo Hersugondo
  • Rio Dhani Laksana

Abstract

Looking at general, the company will hedge when the amount of foreign debt rises along with fluctuations in foreign exchange rates. However, this is not the case with the non-financial sector companies in Indonesia Stock Exchange, which shows a decrease in the use of derivative instruments compared to financial sector companies during the period 2014-2016. Τhe study aims to analyze the effect of internal factors on hedging policies through the use of derivative instruments in nonfinancial companies in the period 2014-2016, by putting the firm size as a control variable. The logistic regression analysis is used to test the antecedents of the hedging policy from the selected sample. The result shows that the liquidity and cash flow volatility have a significant positive effect on the use of derivative instruments. Meanwhile, dividend payout ratio, managerial ownership, leverage and the growth opportunity have no significant effect on hedging policy.

Suggested Citation

  • Sugeng Wahyudi & Fernando Goklas & Maria Rio Rita & Hersugondo Hersugondo & Rio Dhani Laksana, 2019. "The Determinants of Corporate Hedging Policy: A Case Study from Indonesia," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(1), pages 113-129.
    • Handle: RePEc:ers:ijebaa:v:vii:y:2019:i:1:p:113-129
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Lee, Chien-Chiang & Wang, Yurong & Zhang, Xiaoming, 2023. "Corporate governance and systemic risk: Evidence from Chinese-listed banks," International Review of Economics & Finance, Elsevier, vol. 87(C), pages 180-202.
    2. Didik Susilo & Sugeng Wahyudi & Irene Rini Demi Pangestuti, 2020. "Profitability Determinants of Manufacturing Firms in Indonesia," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(2), pages 53-64.
    3. Firman Jatnika & Nury Effendi & Erie Febrian & Mokhamad Anwar, 2019. "Determinants of Business Models Innovation of Islamic Bank in Indonesia," European Research Studies Journal, European Research Studies Journal, vol. 0(2), pages 64-82.

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    More about this item

    Keywords

    Hedging; derivative instruments; liquidity; volatility of cash flow; company size.;
    All these keywords.

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • 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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