This article shows that European firms do their shareholders a disservice if they use bank financing, especially if that financing comes with restrictive covenants and floating interest rates. The restrictive covenants discourage expansion and the floating interest rates make the firm's cash...

All companies hedge currency, interest rate, or commodity price exposure, using natural or contractual hedges. But traditional defensive hedging is restrictive and yet, greater flexibility appears to bring problems of control. Ashok Rao and John Edmunds solve this dilemma in a simple model which...