IDEAS home Printed from
   My bibliography  Save this article

Differential Taxation and Corporate Futures-Hedging


  • Jack E. Wahl
  • Udo Broll


Using a two-moment decision model, this paper analyzes corporate hedging behavior in the presence of differential versus unified income taxation. We start with the well-known result that risk-taking may increase when income tax rates increase and, therefore, the incentive for hedging decreases. We demonstrate that pure hedging is differently affected by taxation from the way speculative hedging is. Analyzing the tax sensitivity of the corporate hedge shows that ahigher risk in the first place may reduce the tax-induced incentive to revise a futures position.

Suggested Citation

  • Jack E. Wahl & Udo Broll, 2007. "Differential Taxation and Corporate Futures-Hedging," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 63(4), pages 583-590, December.
  • Handle: RePEc:mhr:finarc:urn:sici:0015-2218(200712)63:4_583:dtacf_2.0.tx_2-p
    DOI: 10.1628/001522107X269032

    Download full text from publisher

    File URL:
    Download Restriction: Fulltext access is included for subscribers to the printed version.

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    1. Devereux, Michael P & Griffith, Rachel, 2003. "Evaluating Tax Policy for Location Decisions," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 10(2), pages 107-126, March.
    2. Sascha O. Becker & Andrea Ichino & Giovanni Peri, 2004. "How Large Is the "Brain Drain" from Italy?," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 63(1), pages 1-32, April.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Dinkel, Andreas, 2015. "Tax attractiveness and the allocation of risk within multinationals," arqus Discussion Papers in Quantitative Tax Research 189, arqus - Arbeitskreis Quantitative Steuerlehre.

    More about this item


    differential taxation; hedging; mean-variance model; Roy preference function;

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mhr:finarc:urn:sici:0015-2218(200712)63:4_583:dtacf_2.0.tx_2-p. See general 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: (Thomas Wolpert). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.