Hedging, Financing and Investment Decisions: A Simultaneous Equations Framework

We empirically investigate the interactions among hedging, financing, and investment decisions. We argue that the way in which hedging affects a firm's financing and investing decisions differs for firms with different growth opportunities. We find that high growth firms increase their investme...

Full description

Saved in:
Bibliographic Details
Published inThe Financial review (Buffalo, N.Y.) Vol. 42; no. 2; pp. 191 - 209
Main Authors Lin, Chen-Miao, Smith, Stephen D.
Format Journal Article
LanguageEnglish
Published Malden, USA Blackwell Publishing Inc 01.05.2007
Blackwell Publishing Ltd
Subjects
capital expenditures
capital structure
D84
Financial leverage
G31
G32
Hedging
Institutional investments
Investment policy
risk management
Studies
Online AccessGet full text

Cover

More Information
Summary:We empirically investigate the interactions among hedging, financing, and investment decisions. We argue that the way in which hedging affects a firm's financing and investing decisions differs for firms with different growth opportunities. We find that high growth firms increase their investment, but not leverage, by hedging. However, we also find that firms with few investment opportunities use derivatives to increase their leverage.
Bibliography:istex:3B9E98929DB434CC3B4F0703BDE7F2BD159A7B1C
ArticleID:FIRE167
ark:/67375/WNG-8S6QNTGW-N
We thank an anonymous referee for helpful suggestions that have improved the paper. We are grateful to Cynthia Campbell (the editor), Gerald Gay, Omesh Kini, David Nachman, Richard Phillips, and participants at the Eastern Finance Association Meeting and Financial Management Association Meeting for helpful comments.
ObjectType-Article-1
SourceType-Scholarly Journals-1
ObjectType-Feature-2
content type line 23
ISSN:0732-8516
1540-6288
DOI:10.1111/j.1540-6288.2007.00167.x