Why Do Firms Hedge? A Review of the Evidence

Amrit Judge

Chapter 7 in Issues in Finance and Monetary Policy, 2007, pp 128-152 from Palgrave Macmillan

Abstract: Abstract The academic debate on the merits of hedging has identified five main theoretical rationales for corporate hedging: (a) to minimize corporate tax liability; (b) to reduce the expected costs of financial distress; (c) to ameliorate conflicts of interest between shareholders and bondholders; (d) to improve co-ordination between financing and investment policy; (e) to maximize the value of the manager’s wealth portfolio.

Keywords: Interest Rate; Foreign Currency; Debt Ratio; Financial Account Standard Board; Foreign Sale (search for similar items in EconPapers)
Date: 2007
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-0-230-80149-3_7

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DOI: 10.1057/9780230801493_7

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