Hedging, Financing and Investment Decisions: A Simultaneous Equations Framework

Chen‐Miao Lin and Stephen D. Smith

The Financial Review, 2007, vol. 42, issue 2, 191-209

Abstract: 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.

Date: 2007
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https://doi.org/10.1111/j.1540-6288.2007.00167.x

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Persistent link: https://EconPapers.repec.org/RePEc:bla:finrev:v:42:y:2007:i:2:p:191-209

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