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

Sugeng Wahyudi, Fernando Goklas, Maria Rio Rita, Hersugondo Hersugondo and Rio Dhani Laksana

International Journal of Economics & Business Administration (IJEBA), 2019, vol. VII, issue 1, 113-129

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.

Keywords: Hedging; derivative instruments; liquidity; volatility of cash flow; company size. (search for similar items in EconPapers)
JEL-codes: G23 G32 (search for similar items in EconPapers)
Date: 2019
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