Email this article 
The determinants of hedging and firm value: an empirical study in mining companies listed on Indonesia stock exchange
Abstract
This study aims to determine the determinant factors in the company's hedging decisions and to determine whether the activities of corporate hedging decisions through derivative instruments provide increased value for the company. The sample consisted of 33 mining companies listed on Indonesia Stock Exchange during 2011-2015 period. The method used in this study is logistic regression and independent sample t-test. The result of logistic regression by using variable of financial distress, underinvestment cost, and size showed a positive correlation to corporate hedging decision. Meanwhile, by using an independent sample t-test found that the company's hedging decisions significantly affect the value of firms and the companies with hedging decision activity through derivative instruments have more superior value than companies by using natural hedging decisions.
Keywords
Full Text:
PDFReferences
Afza, Talat and Atia Alam. 2016. Foreign Currency Derivatives and Firm Value. European Online Journal of Natural and Social Sciences. Vol.5 (1-14).
Allayanis, George and James Weston.2001. The Use Foreign Currency Derivatives and Firm Market Value. The Review of Financial Study. Spring Journal. Vol . 14 (243-276).
Allayannis, George and Eli Ofek. 2001. Exchange rate exposure, hedging, and the use of foreign currency derivatives, Journal of International Money and Finance. Vol.20 (273-296).
Ahmad and Haris. 2012. Factors for Using Derivatives: Evidence From Malaysian NonFinancial Companies. Research Journal of Finance and Accounting. Vol 3.
Ahmed, et al. 2012. The Effect of Hedging on Firm Value and Performance: Evidence from the Nonfinancial UK Firms. EFMA 2012.
Aretz, Kevin and S. M. Bartram, Gunter Dufey. 2009. Why hedge? Rationales for corporate hedging and value implications. The Journal of Risk Finance. Vol. 8 (434-449).
Bartram, S.M., Brown, G.W., and Fehle, F.R. 2009. International evidence on financial derivatives usage. The Journal Financial management. Vol 38 (185-206).
Biro Analisa Anggaran dan Pelaksanaan APBN. 2014. Penggunaan Hedging di Indonesia dalam Meminimalisir Risiko Nilai Tukar. Retrieved from www.dpr.go.id/
Black, B. S., H. Jang, W. Kim. 2003. Does Corporate Governance Affect Firms’ Market Values?. Evidence from Korea. NBER Working Paper.
Clark, Judge and Ngai. 2006. The Determinants and Value Effects of Corporate Hedging: An Empirical Study of Hong Kong and Chinese Firm. Economics Journal. Middlesex University.
Carter, et al. 2006. Does Hedging Affect Firm Value? Evidence from the US Airline Industry. The Journal Spring Financial Management. (53-86).
Caprisiana, Nadia. 2015. Pengaruh Lindung Nilai Dengan Instrumen Derivatif Terhadap Nilai Perusahaan (Studi Pada Sektor Industri Pertambangan Di Bursa Efek Indonesia). Thesis: Universitas Gadjah Mada Yogyakarta.
Dionne, Georges and Martin Garand. 2002. Risk Management Determinants Affecting Firms Values in the Gold Mining Industry: New Empirical Results. JEL Classification. (1-12).
Froot, K. A., Scharfstein, D. S. and Stein, J. C. 1994. A Framework For Risk Management. Journal of Applied Corporate Finance. Vol. 7 (22-33).
Gay, G.D. and J. Nam, 1998. The Underinvestment Problem and Corporate Derivatives Use. The Journal Financial Management. Vol. 27 ( 53-69).
Graham, J.R., and Rogers, D.A. 2002. Do firms hedge in response to tax incentives?. The Journal of Finance. Vol. 57 (815-839).
Hair, et al. (1995). Multivariate Data Analysis With Reading, Fourth Edition. Pearson Prentice Hall.
Husnan, Suad dan Enny Pudjiastuti. 2012. Dasar-dasar Manajemen Keuangan. Edisi Keenam. UPP STIM YKPN.
Indrawan dkk. 2015. The Role of Currency Hedging on Firm Performance: A Panel Data Evidance in Indonesia. Buletin Ekonomi Moneter dan Perbankan. Vol 17 (280-297).
Jin, Yanbo and Philippe Jorion. 2004. Firm Value and Hedging: Evidence form U.S. Oil and Gas Producers. Departemen of Finance at California State University. (2-41).
Liu. 2003. The Determinans of corporate Hedging and Firm Value: An Empirical Research of European Firms. Department of Finance, School of Economics and Management: Tilburg University.
Lawrence. 2014. Factors Influencing Derivatives Usage by Selected Listed Companies in the Philippines. Philippine Management Review. Vol 21 (1).
Magee, S. (2009). Foreign Currency Hedging and Firm Value: A Dynamic Panel Approach. Finance Center: Macquari University Australia. Vol 1 (35).
Megawati,dkk. 2016. Determinan Keputusan Hedging Pada Perusahaan Manufaktur di Bursa Efek Indonesia. Elektronik Jurnal Ekonomi dan Bisnis Universita Udayana Vol.5 (3391-3418).
Mian, L. Shehzad. 1996. Evidence on Corporate Hedging Policy. The Journal of Financial and Quantitative Analysis. Vol. 31, pp 419-439.
Mseddi, Slim and Fathi Abid. 2010. Corporate Hedging Strategy and Firm Value. International Research Journal of Finance and Economics. (105-128).
Modigliani, Franco and Merton H. Miller. 1958. The Cost of Capital, Corporate Finance and The Theory of Investment. American Economic Review 48 (261-275).
Modigliani, Franco and Merton H. Miller. 1963. Corporate Income Taxes and The Cost of Capital : A Correction. American Economic Review.
Nance, D.R., Smith, C.W. and Smithson, C.W. 1993. On The Determinants of Corporate Hedging. The Journal of Finance. vol. 48 (267-84).
Nguyen, H. and Faff, R. 2003. Futher Evidence on the Corporate Use of Derivatives in Australia: The Case of Foreign Currency and Interest RateInstruments. Australian Journal of Management. Vol. 28 (307).
Nur, Mushlihatun. 2013. Analisis Kebijakan Lindung Nilai dan Pengaruhnya Terhadap Nilai Perusahaan : Studi Empiris Pada Bursa Efek Indonesia. Thesis: Sekolah Pascasarjana Institut Pertanian Bogor.
Raghavendra and Velmurugan. 2014. The Determinants of Currency Hedging in Indian IT Firms. Business & Financial Affair. Vol.3.
Sakaran, Uma and Roger Bougie. 2013. Research Methods fo Business. (A Skill-Building Approach Sixth Edition). Wiley.
Shaari, et al. 2013. The Determinants of Derivative Usage: A study on Malaysian firms. Journal of Institute of Interdisciplinary Business Research. Vol 5.
Smith, C. W. and Stulz, R. M. 1985. The Determinants Of Firms’ Hedging Policies, Journal Of Financial And Quantitative Analysis. Vol 20 (391-405).
Stiles, R.D. 1922. The Effect of Hedging Upon Flour Mill Control. Harvard Business Review. Vol 1 (64-70).
Sudjana. 2005. Metode Statistika Edisi ke enam. Bandung: Tarsito.
Triki, Thouraya. 2005. Research on Corporate Hedging Theories: A Critical Review of the Evidence to Date. HEC Montréal: Canada Research Chair in Risk Management.
Tufano, P. 1996. Who manages risk? An empirical examination of risk management practices in the gold mining industry. The Journal of Finance. Vol 51 (1097-1137).
Utomo, Lisa Linawati. 2000. Instrumen Derivatif: Pengenalan dalam strategi Manajemen Risiko Keuangan. Jurnal Akuntansi dan Keuangan. Vol 2 (53-68).
Putro dan Chabachib. 2012. Analisis Faktor yang Mempengaruhi Penggunaan Instrumen Derivatif Sebagai Pengambilan Keputusan Hedging. E-Journal UNDIP. Vol 1 (11).
Zhu, M. R. 2010. Corporate Hedging, Financial Distress and Product Market Compettition. Working Paper. Austin: University of Texas.
DOI: https://doi.org/10.18860/mec-j.v0i1.5017
Refbacks
- There are currently no refbacks.
Editorial Office:
Faculty of Economics,
State Islamic University of Maulana Malik Ibrahim Malang
Gajayana Street 50, Malang-East Java, Indonesia 65144
Phone (+62) 341 558881, Facsimile (+62) 341 558881
e-mail: mecjournal@uin-malang.ac.id
P-ISSN 2599-3402
E-ISSN 2598-9537
MEC-J is licensed under CC-BY-SA
© All rights reserved 2017.
MEC-J INDEXED IN:
Member of:
