Profitability and Liquidity on Hedging Decision During Covid-19 Pandemic

The global impact of the Covid-19 pandemic, affecting countries worldwide, including Indonesia, has resulted in significant fluctuations and a general decline in currency exchange rates, thereby impacting the world economy. Companies engaged in international business operations have had to take measures to navigate these challenges, and one such measure is making financial decisions, particularly related to hedging. This study seeks to investigate the influence of a company’s profitability and its ability to meet short-term liabilities (liquidity) on their decision to engage in hedging. The research relies on quantitative data, specifically secondary data sourced from the financial reports of manufacturing companies listed on the Indonesia Stock Exchange during the COVID-19 pandemic from 2020 to 2021. The findings reveal that profitability does not significantly affect a company’s decision to hedge, while liquidity has a notable negative impact on such decisions. In conclusion, during a pandemic context, companies facing difficulties in meeting short-term liabilities tend to prioritize risk reduction by employing hedging techniques.