The Influence of Foreign Exchange Risk towards Shareholder Value

Ekayana Sangkasari Paranita, Sugeng Wahyudi

2018

Abstract

Multinational companies that have foreign exchange debt will be burdened with foreign exchange risk because the cash flows in local currencies will be affected by contractual obligations. Cash flow fluctuations may have an impact on shareholder value. There was a research gap on the influence of foreign exchange risk towards shareholder value. In Indonesia, the depreciation of Rupiah rate on foreign exchange rate triggers fluctuation on income and liabilities. The purpose of this study is analyze the influence of foreign exchange risk towards shareholder value with foreign-debt based hedging as a mediation variable. Model developed based on the balancing theory and the contracting theory. Panel regression model applied to analyze the empirical research on public companies listed in the Indonesia Stock Exchange. The findings proved that the foreign exchange risk had positive effect on shareholder value with the foreign-debt based hedging as mediation. So companies that have had foreign exchange risk should apply foreign-debt based hedging to maximize the shareholder value. The findings of this study have theoretical implication that supported contracting and balancing theory.

Paper Citation

in Harvard Style

Paranita E. and Wahyudi S. (2018). The Influence of Foreign Exchange Risk towards Shareholder Value.In Proceedings of the 1st Unimed International Conference on Economics Education and Social Science - Volume 1: UNICEES, ISBN 978-989-758-432-9, pages 1236-1243. DOI: 10.5220/0009500112361243

in Bibtex Style

@conference{unicees18,
author={Ekayana Sangkasari Paranita and Sugeng Wahyudi},
title={The Influence of Foreign Exchange Risk towards Shareholder Value},
booktitle={Proceedings of the 1st Unimed International Conference on Economics Education and Social Science - Volume 1: UNICEES,},
year={2018},
pages={1236-1243},
publisher={SciTePress},
organization={INSTICC},
doi={10.5220/0009500112361243},
isbn={978-989-758-432-9},
}

in EndNote Style

TY - CONF

JO - Proceedings of the 1st Unimed International Conference on Economics Education and Social Science - Volume 1: UNICEES,
TI - The Influence of Foreign Exchange Risk towards Shareholder Value
SN - 978-989-758-432-9
AU - Paranita E.
AU - Wahyudi S.
PY - 2018
SP - 1236
EP - 1243
DO - 10.5220/0009500112361243