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THE ROLE OF CURRENCY HEDGING ON FIRM PERFORMANCE: A PANEL DATA EVIDENCE IN INDONESIA

Bulletin of Monetary Economics and Banking

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Title THE ROLE OF CURRENCY HEDGING ON FIRM PERFORMANCE: A PANEL DATA EVIDENCE IN INDONESIA
 
Creator Indawan, Fiskara
Fitriani, Sri
Karlina, Indriani
Grace, Melva Viva
 
Description This paper analyzes the role of currency hedging on non-financial firm’s performance. Most firms on the sample have anticipated the currency mismatch risk by balancing the ratio of foreign debt to their asset  fenominated in foreign currency. Using panel estimation, we find that there is no evidence of currency hedging activities to affect capital and performance of firms. The result underlines the low intensity of currency hedging activities due to lack of incentives, which is inline with the low derivative transaction within the underdeveloped foreign currency market. This finding may raise a concern since currently the development of foreign liabilities for non-financial firmsin Indonesia is increasing in significant level, as well as the increase risk of domestic currency depreciation. For these reasons, Bank Indonesia should take proactive policies to deepen foreign currency market as well as derivative market by providing a more comprehensive and market friendly hedging instruments to banks and non-financial firms, while keep promoting the benefit of currency hedging.Keywords: Hedging, derivative market, foreign liability.JEL Classification: F31, G31
 
Publisher Bank Indonesia
 
Date 2015-03-27
 
Type info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
Peer-reviewed Article
 
Format application/pdf
 
Identifier https://www.bmeb-bi.org/index.php/BEMP/article/view/39
10.21098/bemp.v17i3.39
 
Source Buletin Ekonomi Moneter dan Perbankan; Vol 17 No 3 (2015): JANUARY; 279-298
Buletin Ekonomi Moneter dan Perbankan; Vol 17 No 3 (2015): JANUARY; 279-298
2460-9196
1410-8046
 
Language eng
 
Relation https://www.bmeb-bi.org/index.php/BEMP/article/view/39/486
 
Rights Copyright (c) 2015 Fiskara Indawan, Sri Fitriani, Indriani Karlina, Melva Viva Grace