Crude palm oil prices and default risk: an analysis of Indonesia's listed agricultural firms

Purpose This study aims to examine how crude palm oil (CPO) price impacts corporate default risk (CDR) of agricultural firms in Indonesia's palm oil industry. Design/methodology/approach By applying a dynamic panel regression on listed CPO-based firms, the authors find that CPO price fluctuations are insignificant in explaining CDR. Findings The main determinants of CDR are internal factors, namely, excess stock market returns and return on assets. External factors do not play any role in influencing the CDR in the case of Indonesia. The results highlight the importance of completing risk analysis at the macro level with firm-specific factors. Originality/value This study highlights the importance of completing risk analysis at the macro level with firm-specific factors in Indonesia as commodity exporting country.