The strategic role of firm size and leverage in moderating the relationship between liquidity, growth opportunities, financial distress, performance, and hedging decisions

This study examines the effects of liquidity, growth opportunities, financial distress, and performance on hedging decisions, as well as the moderating roles of firm size and leverage in these relationships. The study focuses on multinational firms in the primary and non-primary consumer sectors listed on the Indonesia Stock Exchange (IDX) during 2021–2024. As these firms are exposed to foreign exchange fluctuations, hedging is an important risk-management strategy for maintaining financial stability. Based on the sampling criteria, 53 firms were selected over a four-year period, resulting in 212 observations. The data were analyzed using logistic regression. The results show that liquidity and growth opportunities have significant negative effects on hedging decisions, whereas financial distress has no significant effect. As control variables, leverage is insignificant, while firm size and firm performance have significant positive effects on hedging. However, these results change once firm size and leverage are introduced as moderating variables: financial distress exerts a significant positive effect on hedging, while leverage exerts a significant negative effect. Firm size weakens the positive effect of financial distress and attenuates the negative effect of leverage on hedging decisions, while leverage weakens the positive effect of firm performance on hedging.