Corporate hedging and capital structure decisions: towards an integrated framework for value creation
AbstractWe suggest a joint optimization model for a firm’s hedging and leverage decisions that helps to establish an integrated framework for value creation. Rather than artificially separating the two interrelated parts of the firm’s financial policy, we treat both corporate decision variables as endogenous. We argue that exogenous differences between financial distress costs across firms, and particularly across industries, simultaneously influence corporate risk management and capital structure decisions. Using anecdotal evidence, our focus is not on the so-called direct bankruptcy costs, but rather on the cross-sectional variation in indirect bankruptcy costs, which may result from a deterioration of relationships with customers, suppliers,or other stakeholders prior to the legal act of bankruptcy.
Download InfoTo our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
Bibliographic InfoArticle provided by Capco Institute in its journal Journal of Financial Transformation.
Volume (Year): 17 (2006)
Issue (Month): ()
Contact details of provider:
Postal: 120 Broadway, 29th Floor New York, NY 10271
Phone: +1 212 284 8600
Web page: http://www.capco.com/
corporate hedging; leverage; capital structure; risk management; shareholder value; bankruptcy cost; cds spreads; market price risk; trade-off model; market imperfections;
Find related papers by JEL classification:
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Peter Springett).
If references are entirely missing, you can add them using this form.