The Determinants of Corporate Hedging Policy: A Case Study from Indonesia

Wahyudi, Sugeng; Goklas, Fernando; María, .; Hersugondo, Hersugondo; Rio,

doi:10.35808/ijeba/199

Cited by 12 publications

(29 citation statements)

References 37 publications

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“…From the study result, Bartram (2008) proved that the cash flow indicators could measure forex exposure. This finding is similar to Cuestas, Huang and Tan (2018) and Wahyudi et al (2019) that also showed a significant relationship between cash flow indicators and forex exposure. However, Prasad and Suprabha (2015) claimed that although the cash flow method is an efficient tool for measuring forex exposure, most studies preferred using the capital market approach due to data availability.…”

Section: Introductionsupporting

confidence: 90%

“…Most of the past studies measured forex exposure using foreign sales (Afza & Alam 2011;Allayannis & Ofek 2001;Ameer 2010;Clark et al 2006;Jorion 1990;Judge 2006;Marshall, Kemmitt & Pinto 2013;Nydahl 1999;Vural-Yavas 2016;Wahyudi et al 2019;Wong 2000). There is a mixed result on foreign sales as forex exposure indicators, Wahyudi et al (2019) who referred to Ameer (2010) for the usage of foreign sales in measuring forex exposure found a contradicting result to Ameer (2010). One of the reasons for the insignificant effect is, measuring forex exposure solely on foreign sales might not capture the total amount of forex exposure as it will deduct foreign cash flows other than those due to operations.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Their argument is consistent with the definition of forex exposure itself that specified the relationship between cash flow and foreign exchange (Bacha et al 2013;Jeon et al 2017). There are a few past studies that used cash flow indicators, Ameer (2010), Bartram (2008), Cuestas et al (2018) and Wahyudi et al (2019). Bartram (2008) highlighted how operational cash flows, investment cash flows, and financing cash flows, individually and total cash flows have significant relationships with forex exposure.…”

Section: Literature Reviewmentioning

confidence: 99%

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Impact of Foreign Exchange Exposure and Shariah-compliant Status on Malaysian Firms’ Hedging Practice

Wahab¹,

Abdul-Rahim²,

Janor³

2020

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This study investigates the impact of foreign exchange (forex) exposure and Shariah-compliant status on firms' decision to practise hedging. It employs panel multiple and multinomial logistic regression on 702 firm-year observations from 117 non-financial listed firms over the period from 2010 to 2015. The sample consists of 70% Shariah-compliant firms, representative of the 74%-85% Shariah-compliant firms listed on Bursa Malaysia during the study period. From the multinomial logistic regression, this study finds total and net foreign currency exposures are significant in predicting hedging for firms that practice one and two hedging instruments. Moreover, the results also reveal that Shariah-compliant status always significantly and directly influence firms that hedge, except for firms that use four hedging instruments. This study contributes to the literature by introducing direct measurements of foreign currency exposure which prove to be significant indicators of forex exposure. Accurate measurement of forex exposure is crucial as it has implications on the firms' ability to predict its cash flows, commit to future projects, and subsequently, increase its value. Since firms do not disclose whether the instruments used are conventional or Shariah-compliant, this study assumes that all instruments are conventional and therefore, being Shariah-compliant hinder the firms from practising hedging. However, the results reveal those firms that hedge are indeed Shariah-compliant. This finding should raise a great concern among the Islamic capital market regulators to require stricter rules and greater transparency among Shariah-compliant firms.

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Section: Introductionsupporting

confidence: 90%

Section: Literature Reviewmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

See 1 more Smart Citation

Impact of Foreign Exchange Exposure and Shariah-compliant Status on Malaysian Firms’ Hedging Practice

Wahab¹,

Abdul-Rahim²,

Janor³

2020

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“…Working capital is defined as funds used to finance the company's daily operations. Every kind of management may include cash, banking, receivables, inventories and income management that is still acceptable (Wahyudi, Goklas, Rita, Hersugondo and Laksana, 2019). The availability of working capital funds needed by each company varies according to the type of business, as well as the management of the working capital.…”

Section: Hypothesis Developmentmentioning

confidence: 99%

Profitability Determinants of Manufacturing Firms in Indonesia

Susilo¹,

Wahyudi²,

Pangestuti³

2020

IJEBA

Self Cite

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Purpose: The purpose of this study is to explore the most significant profitability determinants of the manufacturing companies in Indonesia. Design/Methodology/Approach: Several independent variables examined for their influence on profitability were working capital, firm size, firm growth, capital structure, and non-debt tax shields. The sample of this study were manufacturing firms listed on the Indonesia Stock Exchange from 2010 to 2017. The number of samples were 350 manufacturing companies. Findings: The results of this study indicate that working capital, firm size and firm growth were positively related to profitability. Meanwhile, capital structure and non-debt tax shield did not affect profitability. The findings of this study were consistent with the pecking order theory and the financial agency theory. Practical implications: This study implies that managers need to adjust their investment needs with the profitability that has been achieved and the total assets of the company, and to maximize the value of the company by managing current assets so that the rate of the return on marginal investment is equal to or greater than the cost of capital used to finance the current assets. Furthermore, financial managers must be able to determine essential investment objectives by maximizing the use of assets and fixed assets which are expected to make the company to enjoy the sales growth in the future. Originality/Value: Although this study organically builds upon recent studies about the firms' profitability, it conducted in the new administrative setting in Indonesia, which is the Widodo's administration. Widodo's administration supports the manufacturing industry to be able to compete globally.

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“…By identifying the overall supporting components of the BM, we can understand how BMs can build value propositions to generate profits using the required processes and resources (Johnson et al, 2008). A business model approach can be used to analyze the competitive structure and make strategic innovation decisions (Hamel, 2000;Wahyudi et al, 2019;Rupeika-Apoga et al, 2018).…”

Section: Literature Reviewmentioning

confidence: 99%

Determinants of Business Models Innovation of Islamic Bank in Indonesia

Jatnika¹,

Effendi²,

Febrian³

et al. 2019

ERSJ

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Purpose: This study analyzes the effect of dynamic capabilities, customer knowledge management, and religiosity each as a determinant that drives all components and systems in an organization to run business model innovations, to improve business performance to be healthy and to grow sustainably. Design/Methodology/Approach: The quantitative, descriptive and explanatory analysis was taken by using the SEM-PLS method. Research data were collected through questionnaires with participants of this study being senior managers of Indonesia Islamic banks. Findings: The results show that religiosity variable together with the Customer Knowledge Management and Dynamic Capability variables simultaneously and partially through business model innovations are proved to influence business performance. Religiosity variables are positive and significant determinants of business model innovation. Religiosity, Customer Knowledge Management, and Dynamic Capability do not directly influence business performance. Practical Implications: The results show that the religiosity variable, alongside Customer Knowledge Management and Dynamic Capability variables simultaneously through business model innovations influences business performance and they can be used by the top management to improve performance. Originality/Value: The study implies a recommendation for Islamic banks to allocate enough resources and invest in improving learning capabilities, building tools and methodologies to find out customer needs in depth.

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The Determinants of Corporate Hedging Policy: A Case Study from Indonesia

Cited by 12 publications

References 37 publications

Impact of Foreign Exchange Exposure and Shariah-compliant Status on Malaysian Firms’ Hedging Practice

Impact of Foreign Exchange Exposure and Shariah-compliant Status on Malaysian Firms’ Hedging Practice

Profitability Determinants of Manufacturing Firms in Indonesia

Determinants of Business Models Innovation of Islamic Bank in Indonesia

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