Research on Financial Hedging Decision Based on Exchange Rate Risk in Transnational Supply Chain

This paper considers a three-echelon manufacturer-retailer-supplier supply chain, the purpose of which is to investigate the influence of the bilateral exchange rate risks of import and export and the leading company’s financial hedging on the decision-makers of the supply chain. Firstly, it constructs the profit function and the financial hedging decision-making model of each member in the decentralized supply chain. Secondly, it introduces the incentive mechanism of exchange rate risk hedging in the centralized supply chain. Thirdly, from the perspective of wholesale price agreements and revenue-sharing contracts, it discusses the impact of financial hedging behavior and bilateral exchange rate risks on the decision-making process of each member through mathematical modeling. Finally, it explores the relationships of decision variables through simulation analysis. The results illustrate that (i) for decentralized and centralized decision-making, the manufacturer’s expected profit and profit variance decrease with the increase of the fluctuations of import and export exchange rates under the hedging strategy for exchange rate risks; (ii) compared with the decentralized supply chain, the manufacturer’s expected profit in the centralized supply chain decreases slightly under the revenue-sharing contract; (iii) in the centralized supply chain, if the manufacturer’s risk hedging ratio is high, its profit variance is smaller than that of the decentralized supply chain and the expected profits of the retailer and the supplier will increase significantly; and (iv) for the members of the transnational supply chain, centralized decision-making is better than decentralized decision-making.

Assessing Long-run Dynamics of Financial Hedging, A New Determinants of Green Financing in E7 and G7 Countries

The study estimates the long-run dynamics of a cleaner environment in promoting the gross domestic product of E7 and G7 countries. The recent study intends to estimate the climate change mitigation factor for a cleaner environment with the GDP of E7 countries and G7 countries from 2010 to 2018. For long-run estimation, second-generation panel data techniques including Augmented Dickey-Fuller (ADF), Phillip-Peron technique and fully modified ordinary least square (FMOLS) techniques are applied to draw the long-run inference. The results of study are robust with VECM technique. The outcomes of study revealed that climate change mitigation indicators affect more to the GDP of G7 countries than E7 countries. The GDP of both E7 and G7 countries is found depleting due to less clean environment. However, green financing techniques may clean the environment and reinforce the confidence of policymakers on the elevation of green economic growth in G7 and E7 countries. Furthermore, results show that a 1% rise in green financing index improves the environmental quality by 0.375% in G-7 countries, while it purifies 0.3920% environment in E7 countries. There is a need to reduce environmental pollution, shift energy generation sources towards alternative, innovative and green sources.

Apakah Financial Dan Operational Hedging Efektif Mengurangi Eksposur Nilai Tukar?

n the midst of regulators' efforts to deepen the market by encouraging foreign exchange derivative transactions, this study aims to observe the effect of these derivative instruments from company perspective in reducing exchange rate exposures. In addition to hedge using derivative instruments (financial hedging), this study also observed hedging performed through firm’s operational activity (operational hedging) with control variables of export sales and foreign debt. The research object is manufacturing companies listed in IDX (Indonesia Stock Exchange) during 2010-2018 using panel data regression as data analysis method. Empirical results show that financial hedging reduce exchange rate exposures faced by companies while operational hedging has no effect. Export sales provide positive exchange rate exposures and foreign debt provide negative exchange rate exposures.