The real and financial implications of corporate hedging
By: Murillo Campello ... [et al.].
Contributors: National Bureau of Economic Research
Series: NBER working paper series -- working paper 16622; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 16622.
Publisher: National Bureau of Economic Research
Published: 2010
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Description: "We study the implications of hedging for firm financing and investment.  We do so using an extensive, hand-collected dataset on corporate hedging activities.  Hedging can lower the odds of negative firm realizations, reducing the expected costs of financial distress.  In theory, this should ease a firm's access to credit.  Using a tax-based instrumental variable approach, we find that hedgers pay lower interest spreads and are less likely to have capital expenditure restrictions in their loan agreements.  These favorable financing terms, in turn, allow hedgers to invest more.  Our tests characterize two exact channels (cost of borrowing and investment restrictions) through which hedging affects corporate outcomes.  The analysis we present shows that hedging has a first-order effect on firm financing and investment, and provides new insights into how hedging affects corporate wealth.  More broadly, our study contributes novel evidence on the real consequences of financial contracting"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 4/5/2011.

Includes bibliographical references.

Also available in print.

System requirements: Adobe Acrobat Reader.

Mode of access: World Wide Web.