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The Impact of Foreign Exchange Rate Hedging Towards Firm Value: Case of Indonesia’s Listed Manufacturing Firms

Erlin Anggreani Riadi, Mandra Lazuardi Kitri

Abstract


Abstract. This paper analyzes the use of financial derivative assets for foreign exchange rate hedging purpose and its effect on firm value using the data of Indonesia’s manufacturing companies who do export sales and conduct foreign exchange rate hedging activities using derivatives. The period of research in this paper is 2009 until 2018, capturing the trend of strengthening and weakening of Rupiah against USD. This research used the percentage of foreign exchange rate hedging towards amount of foreign account receivable in the same currency as the independent variable and Tobin’s Q ratio representing the firm value. This research used multi-linear regression and found that foreign exchange rate hedging activities with derivatives does not significantly affect the firm value in Indonesia’s manufacturing companies.

Keywords: Hedging; derivative use; firm value; Tobin’s Q

 


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