Business, Management and Accounting
4 years ago

Firms Hedge to Increase Debt Capacity, Tax Benefits Averaging 1.1%

The Journal of Finance
Do Firms Hedge in Response to Tax Incentives?
John R. Graham, Daniel A. Rogers

Paper Summary

Firms hedge with derivatives to increase debt capacity and tax benefits, not because of tax convexity. Financial distress costs and firm size also influence hedging decisions.

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