Hedging, financing, and investment decisions: A simultaneous equations framework

Arbeitspapier

The purpose of this paper is to empirically investigate the interaction between hedging, financing, and investment decisions. This work is relevant in that theoretical predictions are not necessarily identical to those in the case where only two decisions are being made. We argue that the way in which hedging affects the firms’ financing and investing decisions differs for firms with different growth opportunities. We empirically find that high-growth firms increase their investment, but not their leverage, by hedging. However, we also find that firms with few investment opportunities use derivatives to increase their leverage.

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• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 2005-5

Classification and Topics

• Classification: Wirtschaft ; Capital Budgeting; Fixed Investment and Inventory Studies; Capacity ; Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
• Subject: investment ; financing ; hedging ; Investitionsentscheidung ; Unternehmensfinanzierung ; Hedging ; Simultanes Gleichungssystem

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Lin, Chen-miao ; Smith, Stephen D. ; Lin, Chen-miao ; Smith, Stephen D.
• Event: Veröffentlichung
• (who): Federal Reserve Bank of Atlanta
• (where): Atlanta, GA
• (when): 2005

Further information

• Handle: http://hdl.handle.net/10419/101020