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Investigating the Simultaneity of Corporate Hedging and Debt Policies: Empirical Evidence from Indonesia

Gadjah Mada International Journal of Business (GamaIJB) · Vol. 7 No. 2 (2005) · hlm. 179–204

DOI
10.22146/gamaijb.5578
ISSN
2338-7238, 1411-1128
Terbit
2005-06-12
Penerbit
Master in Management, Faculty of Economics and Business, Universitas Gadjah Mada
Bahasa
eng

Abstrak

The primary objective of this paper is to investigate the simultaneity of corporate hedging and debt policies. Using a pooled sample of Indonesian non-financial listed firms covering the periods of 1996-2001, the present study finds evidence that corporate hedging and debt policies are simultaneously determined. That is, the use of debts motivate firms to hedge; but simultaneously, hedging increases debt capacity and induces firms to borrow more in order to take advantage of the tax benefits arising from additional debt capacity. Another important finding is that financially distressed firms –as indicated by their debt restructuring programs– are less motivated to hedge, because such firms will see that the option values of their equity will increase as their cash-flow volatilities increase. Therefore, financially distressed firms tend not to hedge; or at least, hedge lesser compared to those of firms that do not experience financial distress.

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Sumber metadata: OAI-PMH (metadata jurnal) https://journal.ugm.ac.id/gamaijb/oai, pertama di-harvest 28 Okt 2026, terakhir terlihat 8 Nov 2026.
Metadata asli (oai_dc) 
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	<dc:title xml:lang="en-US">Investigating the Simultaneity  of Corporate Hedging and  Debt Policies: Empirical Evidence from Indonesia</dc:title>
	<dc:creator>Suriawinata, Iman Sofian</dc:creator>
	<dc:subject xml:lang="en-US">currency derivatives; corporate hedging policy; debt policy</dc:subject>
	<dc:description xml:lang="en-US">The primary objective of this paper is to investigate the simultaneity of corporate hedging and debt policies. Using a pooled sample of Indonesian non-financial listed firms covering the periods of 1996-2001, the present study finds evidence that corporate hedging and debt policies are simultaneously determined. That is, the use of debts motivate firms to hedge; but simultaneously, hedging increases debt capacity and induces firms to borrow more in order to take advantage of the tax benefits arising from additional debt capacity. Another important finding is that financially distressed firms –as indicated by their debt restructuring programs– are less motivated to hedge, because such firms will see that the option values of their equity will increase as their cash-flow volatilities increase. Therefore, financially distressed firms tend not to hedge; or at least, hedge lesser compared to those of firms that do not experience financial distress.</dc:description>
	<dc:publisher xml:lang="en-US">Master in Management, Faculty of Economics and Business, Universitas Gadjah Mada</dc:publisher>
	<dc:date>2005-06-12</dc:date>
	<dc:type>info:eu-repo/semantics/article</dc:type>
	<dc:type>info:eu-repo/semantics/publishedVersion</dc:type>
	<dc:type xml:lang="en-US">Peer-reviewed Article</dc:type>
	<dc:format>application/pdf</dc:format>
	<dc:identifier>https://journal.ugm.ac.id/gamaijb/article/view/5578</dc:identifier>
	<dc:identifier>10.22146/gamaijb.5578</dc:identifier>
	<dc:source xml:lang="en-US">Gadjah Mada International Journal of Business; Vol 7, No 2 (2005): May-August; 179-204</dc:source>
	<dc:source>2338-7238</dc:source>
	<dc:source>1411-1128</dc:source>
	<dc:language>eng</dc:language>
	<dc:relation>https://journal.ugm.ac.id/gamaijb/article/view/5578/4549</dc:relation>
</oai_dc:dc>