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DoFirmsHedgeinResponsetoTaxIncentives?JOHNR.GRAHAMandDANIELA.ROGERSPrebyXu,Ying(徐颖)THEJOURNALOFFINANCE?VOL.LVII,NO.2?APRIL2002
OverviewMotivationTheoreticalExplanationsofWhyFirmsHedge--dependentvariablesDerivativesDataandConstructionofHedgingVariablesEmpiricalAnalysisofCorporateHedgingandDebtPolicyConclusion
MotivationTwotaxincentivesforcorporationstohedge:toincreasedebtcapacityandinteresttaxdeductionstoreduceexpectedtaxliabilityifthetaxfunctionisconvex.Testwhethertheseincentivesaffecttheextentofcorporatehedgingwithderivatives
TheoreticalExplanationsofWhyFirmsHedgeMMtheory-irrelevancepropositionsIntheabsenceofmarketimperfections,hedgingdoesnotincreasefirmvalue.InrealworldMarketimperfectionsimposecostsonthecorporationandHedginghelpsreducethesecosts.IncentivesforcompaniestoHedgedependentvariables·TaxIncentivestoHedge·NontaxIncentivestoHedge
Volatilityiscostlyforfirmswithconvexeffectivetaxfunctions.A.TaxIncentivestoHedge-TaxFunctionConvexityExampleNohedgehedgee50%10,00050%-10,0000Expectede00Tax(35%)1,7500Total-1,7500
theGrahamandSmith’s(1999)approach(explicitinsteadofimplicit)Theconvexity-basedbenefitsofhedgingexpectedtaxliabilitywithvolatilityreducedby5%(empiricalriskreduction)expectedtaxliabilityfora“fullvolatility”DifferencebetweenandA.TaxIncentivestoHedge-Howtomeasuretaxfunctionconvexity
theGrahamandSmith’s(1999)approach(explicitinsteadofimplicit)Theconvexity-basedbenefitsofhedgingexpectedtaxliabilitywithvolatilityreducedby5%(empiricalriskreduction)expectedtaxliabilityfora“fullvolatility”DifferencebetweenandA.TaxIncentivestoHedge-HowtomeasuretaxfunctionconvexityThereportedanalysisisbasedonvolatilityofsalesrevenue（taxableearningsisOK，though）
Stulz,Ross,andLelandthevolatility
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