FINANCIAL RISK HEDGING, BORROWING AND CAPITAL EXPENDITURE

Abstract

In this paper we provide new evidence on the relation between hedging, debt financing and capital expenditure. Specifically, we analyze the size and timing ofdebt visits and capital expenditures in relation to a given years hedging activity. Our results suggest hedging activity is more positively related to new borrowings than leverage, but unrelated to same-period capital expenditure. The first result is consistent with an external financing motivation but the second implies factors other than underinvestment drive hedging policy.