Decision Determination with Hedging Financial Derivative Instruments in the Manufacturing Sector Company

Abstract

Hedging is an alternative of company that aims to protect the assets of company from losses caused by the risk.  This study purposed to analyze the influence of independent variables which include firm size, growth opportunity, liquidity, and leverage on determined hedging decision using derivative instruments at manufacturer companies listed on the Indonesia Stock Exchange in 2015-2018.  Sample selection method used in this research is purposive sampling method with criteria manufacturer companies basic industry and chemicals, and miscellaneous industry sector and the publication of annual financial report routine since 2015-2018.  This method result samples 40 companies for research.  This study using logistic regression analysis, to find sets of independent variables that affect the probability the use of derivative instruments as hedging activities.  The results showed that variable firm size has significant effect on hedging decision.  Variable growth opportunity, liquidity and leverage has not significant effect on hedging decision.

Keywords:  Hedging, Derivative Instruments, Firm Size, Growth Opportunity, Liquidity, Leverage

DOI: 10.7176/RJFA/11-18-20

Publication date:September 30^th 2020