We examine the underinvestment rationale for corporate hedging and test the hypothesis that if firms hedge to reduce … both their reliance on external funds and the volatility of internal cash flow, then their investment spending should be … less sensitive to prehedged cash flow. Our results are consistent with this hypothesis and indicate that investment …

This paper studies the interplay between firm investment and cash flow hedging decisions when the decision-maker has … device to mitigate premature investment. Our results thus highlight one unexplored potential dark side of hedging and suggest … time-inconsistent preferences. We show that cash flow hedging acts as a double-edged sword. In some cases, cash flow …

, consumption/savings, and portfolio selection. For a lump-sum investment payoff and an agent with a sufficiently strong … precautionary savings motive, an increase in volatility can accelerate investment, contrary to the standard real options analysis …. When the agent can trade the market portfolio to partially hedge against investment risk, the systematic volatility is …

that cash-flow hedging and capital investment by firms affects their future stock return distribution. Hedging by firms … investment counteracts these effects. Using hand-collected hedging data from energy-related firms, we find empirical results …, investment and financial policies on the higher moments of their stock return distributions. We introduce novel channels showing …

, consumption/savings, and portfolio selection. For a lump-sum investment payoff and an agent with a sufficiently strong … precautionary savings motive, an increase in volatility can accelerate investment, contrary to the standard real options analysis …. When the agent can trade the market portfolio to partially hedge against investment risk, the systematic volatility is …