Juliana, Rita (2015) Analyzing the Impacts of Hedging on Cost of Debt: Indonesia’s Public Listed Companies 2007-2013 Study Case. Masters thesis, Swiss German University.

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Abstract

Nowadays, the use of hedging strategy as part of its risk management strategy is becoming essential, particularly in Indonesia. This study investigate further the corporate finance theories which suggest that firms benefit from hedging due to the reduction of bankruptcy risk or financial distress and the mitigation of agency problem. It studies the impact of hedging strategy to the cost of debt in a sample of 183 Indonesian companies (1281 year observations) from 2007 to 2013. Further, this study also examines the sources of hedging benefit in reducing the cost of debt through the reduction of financial distress and agency costs. Panel two-stage-least-square (2SLS) and diagnostic tests are conducted to ensure the validity of the model. It is proven that, throughout the whole process, there is significant negative impact of hedging to cost of debt. Empirical result shows that hedging firms is paying 141 basis point lower cost of debt than the non-hedge firms. Additionally, it is proven that hedging is more beneficial to firm with higher leverage, since the reduction of the financial distress is also greater. However, this study also gives strong evidence that hedging reduces the cost of debt by mitigating the agency problem.

Item Type:	Thesis (Masters)
Uncontrolled Keywords:	Corporate Finance, Cost of debt, Hedging, Risk Management, Agency Cost, Information Asymmetry, 2SLS.
Subjects:	H Social Sciences > HF Commerce > HF5001 Business
Divisions:	Faculty of Business Administration and Communication > Department of Business Administration
Depositing User:	Faisal Ifzaldi
Date Deposited:	21 Jul 2023 09:13
Last Modified:	21 Jul 2023 09:13
URI:	http://repository.sgu.ac.id/id/eprint/2586

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