sensitivities are particularly intense for unconstrained firms with high hedging needs. Investment opportunities (as proxied by Q …), however, play a larger role for constrained firms with the effects being strongest in case of low hedging needs. Interestingly …, constrained firms with low hedging needs are found to employ more debt to finance their investment opportunities and build up …

This paper studies the interaction between corporate hedging and liquidity policies. We present a theoretical model … that shows how corporate hedging facilitates greater reliance on cost-effective, externally-provided liquidity in lieu of … internal resources. We test the model's predictions by employing a new empirical approach that separates cash flow hedging from …