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The Effect of Hedging with Financial Derivatives on Firm Value at Indonesia Stock Exchange

Author

Listed:
  • Budi Frensidy

    (Department of Accounting, Faculty of Economics and Business, Universitas Indonesia)

  • Tasya Indah Mardhaniaty

    (Department of Accounting, Faculty of Economics and Business, Universitas Indonesia)

Abstract

This study aims to analyze the effect of hedging for the risks of foreign currency, interest rate, and commodity price on firm value as measured by Tobin’s Q. The findings reveal that hedging with derivative instruments is insignificantly related to firm value but significantly varied in financial risks. Hedging for foreign currency risk has a significantly positive relation to firm value, while hedging for interest rate and commodity price risk has no relation. Furthermore, this study provides a novelty compared to previous studies in the utilization of the extent of hedging as the variable to measure the implementation of hedging.

Suggested Citation

  • Budi Frensidy & Tasya Indah Mardhaniaty, 2019. "The Effect of Hedging with Financial Derivatives on Firm Value at Indonesia Stock Exchange," Economics and Finance in Indonesia, Faculty of Economics and Business, University of Indonesia, vol. 65, pages 20-32, Juni.
    • Handle: RePEc:lpe:efijnl:201902
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    Cited by:

    1. Oyegbile Akeem Bamidele, 2024. "Hedging with Financial Derivatives and Firm Performance of Consumer Goods Companies Listed on Nigeria Exchange Group," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 8(1), pages 2358-2373, January.

    More about this item

    Keywords

    hedging; derivative instruments; foreign currency risk; interest rate risk; commodity price risk;
    All these keywords.

    JEL classification:

    • F3 - International Economics - - International Finance
    • G3 - Financial Economics - - Corporate Finance and Governance

    Statistics

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