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Is cash negative debt under the perspective of hedging in Brazil?

Author

Listed:
  • Marcio Telles Portal

    (Vale do Rio dos Sinos University - UNISINOS)

  • João Zani

    (Vale do Rio dos Sinos University - UNISINOS)

  • Carlos Eduardo Schönerwald da Silva

    (Rio de Janeiro Federal University - UFRJ)

Abstract

The present study investigates whether listed Brazilian companies between 1995 and 2008 coordinated cash and debt policies for effects of hedging against underinvestment under conditions of financial constraint. The results indicate the absence of a hedging component when simultaneously using cash and debt policies in constrained firms. For firms with financial constraints there was positive sensitivity of cash to cash flow and negative sensitivity of debt to cash flow, regardless of the need for hedging. The unconstrained firms did not present statistically significant sensitivity of cash to cash flow, but presented negative sensitivity of debt to cash flow, results that were also independent of the need for hedging. These findings run counter to those of Acharya, Almeida & Campello (2007) in the American market, where cash and negative debt were found to play different roles in intertemporal optimization of investments among constrained firms, according to the need for hedging.

Suggested Citation

  • Marcio Telles Portal & João Zani & Carlos Eduardo Schönerwald da Silva, 2013. "Is cash negative debt under the perspective of hedging in Brazil?," Brazilian Business Review, Fucape Business School, vol. 10(1), pages 1-26, January.
    • Handle: RePEc:bbz:fcpbbr:v:10:y:2013:i:1:p:1-26
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