文档介绍：Part IV Managing the Risks of Multinational Operations
Ch 9 The rationale for hedging currency risk
Ch 10 Multinational treasury management
Ch 11 Managing transaction exposure
Ch 12 Managing operating exposure
Ch 13 Managing translation exposure
Ch 14 Country risk management
Chapter 9 The Rationale for Hedging Currency Risk
A Perfect Model for an Imperfect World
When Hedging Adds Value
Convexity in the Tax Schedule
Costs of Financial Distress
Agency Costs
The Hedging Decision
Summary
Corporate hedging and firm value
V = St [E[CFt] / (1+it)t
For hedging to have value, it must
increase expected future cash flows
or
decrease investors’ required return
The perfect market assumptions …a starting point
No market frictions
No transactions costs
No taxes or government intervention
No costs of financial distress
No agency costs
Equal access to market prices
petition
No barriers to entry
Equal access to costless information
Rational investors
Return is good and risk is bad
Perfect financial markets and corporate financial policy
If financial markets are perfect, then financial policy is irrelevant
If financial policy is to increase firm value, then it must either
increase expected future cash flows, or
decrease the discount rate
in a way that cannot be replicated by individual investors
Perfect financial markets and risk hedging
If financial markets are perfect, then hedging policy is irrelevant
If financial policy is to increase firm value, then it must either
increase expected future cash flows, or
decrease the discount rate
in a way that cannot be replicated by individual investors
When hedging matters
Tax schedule convexity
Progressive taxation
Tax preference items
Tax loss carryforwards and carrybacks
Investment tax credits
Costs of financial distress
Direct costs
Indirect costs
Lost credibility (lower sales, higher expenses)
Conflicts of interest between debt and equity
Agency costs – Arising from c