SAIF Seminar Series (17)
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Topic: | SAIF Seminar Series (17) | |
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Time: | Friday , 2010-10-15 12:00-08:00 | |
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Venue: | ||
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Speaker: | Chen Lin | |
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Affiliations: | The Chinese University of Hong Kong | |
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Topic:
SAIF Seminar Series (17)
Time:
星期四,2010-10-15 10:30-12:00
Venue:
Room 505, Datong Building, 211 West Huaihai Road, SAIF
Speaker:
Chen Lin
''The Real and Financial Implications of Corporate Hedging''
Abstract
Does hedging affect corporate outcomes? This paper looks at the consequences of hedging for firm financing and investment. It does so using detailed, hand-collected data on hedging and loan contracts. Hedging can lower the odds of negative profit realizations, reducing the expected costs of financial distress. In theory, this should ease a firm’s access to credit. Using a tax-based instrumental variables approach, we find that hedgers pay lower interest spreads and are less likely to have capital expenditure restrictions in their loan agreements. These favorable financing terms, in turn, allow hedgers to invest more. Our results identify two channels (cost of borrowing and investment restrictions) through which hedging affects firms outcomes. The study provides new evidence on the real consequences of financial contracting.
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