Financial Flexibility, Risk Management, and Payout Choice

• 成果类型: Article
• 署名作者: Bonaime, Alice Adams; Hankins, Kristine Watson; Harford, Jarrad
• 署名单位: University of Kentucky; University of Washington; University of Washington Seattle
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hht045
• 发表日期: 2014
• 页码: 1074
• 关键词: information-content; corporate-investment; DIVIDEND CLIENTELES; REPURCHASE PROGRAMS; empirical-evidence; POLICY; FIRMS; cash; derivatives; determinants

摘要

Both risk management and payout decisions affect a firm's financial flexibility-the ability to avoid costly financial distress as well as underinvestment. We provide evidence of substitution between hedging and payout decisions using samples of both financial and nonfinancial firms. We find that a more flexible distribution, favoring repurchases over dividends, is negatively related to financial hedging within a firm, consistent with financial flexibility in payout decisions and hedging being substitutes. Our findings, which are robust to controlling for the endogeneity of hedging and payout choices, suggest that payout flexibility offers operational hedging benefits.