2002-01-01Zeitschriftenartikel DOI: 10.2139/ssrn.147851
Do Firms Use Derivatives to Reducetheir Dependence on External Capital Markets?
Adam, Tim René
This study investigates if the use of derivatives by corporations is likely to affect their financing strategies. I find a strong positive relation between the minimum revenue guaranteed by hedging and investment expenditures. This result implies that hedging increases the likelihood that investments can be financed internally. I also find that firms tend to finance their investment expenditures externally rather than internally. If external capital is more costly than internal capital it would clearly be in a firm’s interest to reduce its dependence on external capital. Consistent with this result, I find that the median firm that does not hedge finances 100% of its investment expenditures externally, while the median firm that hedges finances only 86% of investments externally.
Dateien zu dieser Publikation
Is Part Of Series: Review of Finance, 6, 2002, pp 163-187, http://www.revfin.org/