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

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)

Economics and Finance in Indonesia
Volume 65, Number 1, June 2019

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.