Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
960925 | Journal of Financial Markets | 2009 | 21 Pages |
Abstract
Apart from the obvious reasons for raising capital, a firm can hedge its interest rate exposure by issuing debt, the value of which moves in an opposite direction from the value of its assets as interest rate varies. We examine whether firms in the UK market make full use of debt issuances for hedging purposes or if they have other considerations. Our evidence shows that firms' choices of debt issues are primarily driven by debt market conditions in an effort to lower their costs of capital rather than managing their firm-specific interest rate exposures. This suggests that market timing, as opposed to hedging, is the primary motivation behind corporate debt issuances.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Antonios Antoniou, Huainan Zhao, Bilei Zhou,