THE EFFECT OF FINANCIAL DISTRESS, FIRM SIZE, AND MARKET TO BOOK VALUE ON HEDGING DECISIONS

Abstract

The Influence of Financial Distress, Firm Size, and Market to Book Value on Hedging Decisions. Faculty of Economics and Business, Universitas Negeri Jakarta, 2025. This study aims to analyze the influence of financial distress, firm size, and market to book value on hedging decisions in energy sector companies listed on the Indonesia Stock Exchange. The research sample was obtained using purposive sampling, with a total of 152 observational data points collected over the 2021–2024 period. The data used are secondary data sourced from company financial reports accessed through the official website of the Indonesia Stock Exchange (IDX) and several other supporting sources. Data analysis was performed using binary logistic regression with the assistance of SPSS version 29 software. The results show that firm size has a significant positive effect on hedging decisions, while financial distress and market to book value do not have a significant effect. These findings indicate that firm size is a key factor in determining risk management decisions through hedging strategies. This study implies that firm size plays an important role in hedging decisions and supports agency theory. The findings are useful for management in strengthening risk strategies, for investors as a basis for evaluating managerial capacity, and for regulators in promoting transparency in corporate hedging practices.