Hedging Decision and Value of Public Companies Indexed at LQ45 Indonesia Stock Exchange

Abstract

This study was conducted to reveal empirical facts on the impact of hedging decisions using derivative instruments on firm value and financial performance by using a sample of public companies listed on the LQ45 Index of the Indonesia Stock Exchange. The results of hypothesis testing reveal that hedging by using derivative instruments has a significant negative effect on firm value. This finding partially supports the conclusion of research conducted by Lenee and Oki (2017). However, this contradicts the findings of Alan and Gupta (2018) and Lenee and Oki (2017), who conclude that the use of hedging can minimize the volatility of foreign transactions and has a positive effect on increasing firm value. In line with the results of a research review conducted by Geyer-Klingeberg et al. (2021), there are contradictory results due to various factors that make the research findings inconsistent. Bachillera. et al. (2020) describe controversial results due to country specificity and different hedging types.