Value Drivers and Company Valuation in the Manufacturing Industry that Conducts Foreign Exchange Hedging

Martha Racwel Patty

doi:10.59890/ijmbi.v3i5.181

Authors

Martha Racwel Patty University of Pattimura

DOI:

https://doi.org/10.59890/ijmbi.v3i5.181

Keywords:

Value drivers, Sales Growth, Operating Profits, Fixed Asset Investment, Working Capital Investment, Firm Value, Capital Cost

Abstract

This study aims to examine the effect of value drivers—sales growth, operating profit, fixed asset investment, working capital investment, and capital cost—on firm value among manufacturing companies in Indonesia that hedge their foreign exchange derivatives. The research focuses on both partial and simultaneous influences of these variables to better understand the key determinants of firm value in a hedging context. The study employs a quantitative approach using panel data regression analysis. The population consists of 693 manufacturing firms listed on the Indonesia Stock Exchange (IDX), with 11 firms selected as samples through purposive sampling. Hypothesis testing was conducted using the t-test and F-test to determine the significance of each independent variable’s effect on firm value. The results indicate that sales growth, operating profit, and working capital investment have a positive and significant effect on firm value. Conversely, fixed asset investment and capital cost show a negative but insignificant relationship with firm value. Overall, the value driver variables collectively exert a positive and significant influence on firm value. The findings emphasize the importance of optimizing profitability and working capital efficiency to enhance firm value. Managers should carefully manage investment structures and capital costs when implementing hedging strategies to achieve sustainable firm growth. This study contributes to the literature by integrating value driver theory with corporate hedging practices in the context of emerging markets, offering empirical evidence from Indonesian manufacturing firms.

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