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

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Author Info

  • 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.

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File URL: http://www.bbronline.com.br/public/edicoes/10_1/artigos/faekarfcoo2532013221819.pdf
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Bibliographic Info

Article provided by Fucape Business School in its journal Brazilian Business Review.

Volume (Year): 10 (2013)
Issue (Month): 1 (January)
Pages: 1-26

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Handle: RePEc:bbz:fcpbbr:v:10:y:2013:i:1:p:1-26

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Web page: http://www.bbronline.com.br/
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Related research

Keywords: Hedging; cash; debt; investment; financial constraint.;

References

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  1. Cristiano M. Costa & Lourenço Senne Paz & Bruno Funchal, 2008. "Are Brazilian Firms Savings Sensitive to Cash Windfalls?," Brazilian Business Review, Fucape Business School, vol. 5(2), pages 136-142, May.
  2. Iquiapaza, Robert & Lamounier, Wagner & Amaral, Hudson, 2006. "Assimetria de Informações e Pagamento de Proventos na Bovespa
    [Asymmetric Information and Dividends Payment at Bovespa]
    ," MPRA Paper 1673, University Library of Munich, Germany.
  3. Dittmar, Amy & Mahrt-Smith, Jan & Servaes, Henri, 2003. "International Corporate Governance and Corporate Cash Holdings," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 38(01), pages 111-133, March.
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