ANALYSIS OF THE FACTORS AFFECTING HEDGING DECISIONS ON MANUFACTURING COMPANY LISTED IN INDONESIA STOCK EXCHANGE

Abstract

Hedging is a tool in business strategy. The aim of hedging is to reduce risk that company face in this globalization. This research aims to predict what variables that affecting derivative instruments application as hedging decision making in companies. The advantage companies know the probability of variables that most influence of companies to use derivative instruments as hedging activities is the firms could protect themselves from loss that caused from the risk of market fluctuation, after that firms can get gain as a result avoids the risk. The population in this research is the type of Manufacturing Companies that listed on the Stock Exchange Indonesia during the period 2009 to 2011. This research used logistic regressions analysis method to find sets of the probability of variables that affect the use of derivative instruments as hedging decision. Variables used in this research are Debt Equity Ratio, Financial Distress, Growth Opportunity, Liquidity, and Firm Size. The test result is the probability of those variables impact and the value of that variables affecting hedge activity.