The Effect of Derivative Usage in Companies on Firm Value with Corporate Governance as a Moderating Variable

Abstract

This study investigates the extent to which the use of derivative instruments shapes firm value among Indonesian manufacturing corporations, treating corporate governance quality as a conditional moderating mechanism. Employing a balanced panel of 34 publicly listed manufacturing firms observed across three fiscal years (2022–2024), yielding 102 firm-year observations, the analysis applies a Random Effects panel data regression framework. Empirical findings demonstrate that derivative utilization negatively influences firm value (β = −0.142; p < 0.01), whereas corporate governance quality positively influences firm value (β = 0.038; p < 0.01). Critically, the interaction term between derivative utilization and corporate governance quality is both positive and statistically significant (β = 0.045; p < 0.01), indicating that derivative instruments contribute positively to firm value exclusively when governance quality surpasses a threshold index of approximately 11.51. These results underscore corporate governance as an indispensable institutional prerequisite for derivatives to fulfill their intended value-enhancing function, offering substantive implications for policymakers, practitioners, and future scholarship.