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Faculty Research

THE DETERMINANTS OF EXCHANGE RATE RISK MANAGEMENT IN DEVELOPING COUNTRIES:EVIDENCE FROM INDONESIA

Detail
Author NEVI DANILA (Tim: Anggota 1)
ID 202.710.123
Published Date 17-11-2015

Abstract

-Abstract Studies on exchange-rate risk management in developing countries are still very rarely addressed. This study investigated determinants of exchange rate risk management (hedging) in Indonesian firms. Using 276 samples of listed firms in the Indonesia Stock Exchange and employing a Logit regression model, we found that only firm size is associated with a hudging in the listed companies. The findings are not consistent with the study proposed in the developed countries. It suggests that most of the large Indonesian companies are conglomerates with controlling shareholders who have the authority for hedging and making financing decisions. The finding also suggests that the hedging market in Indonesia is not yet mature. Furthermore, firms are either not familiar with the hedging instruments or may not be big enough to hire professionals to deal with the complicated and costly hedging instruments Keyword: derivatives; firm size; market to book asset ratio; risk management; hedging; exchange rate; devidend yield; leverage; profitability; Indonesia.