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A smoother ride: companies based in countries with bankruptcy procedures that favour creditors over shareholders have a greater incentive to hedge

Judge, Armit

Authors

AMRIT JUDGE Amrit.Judge@nottingham.ac.uk
Associate Professor



Abstract

In their seminal work, Nobel prize-winning economists Franco Modigliani and Merton Miller (M&M) argued that in a perfect capital market, where there are no taxes and no contracting costs, such as those associated with bankruptcy, a firm’s choice of financial policy does not affect its market value. As a firm’s hedging policy involves the issue of financial claims against a firm, it is also a component of its financing policy. Therefore, the M&M proposition can be extended to hedging.

Citation

Judge, A. (2016). A smoother ride: companies based in countries with bankruptcy procedures that favour creditors over shareholders have a greater incentive to hedge. Treasurer, 48-49

Journal Article Type Article
Acceptance Date May 1, 2016
Online Publication Date May 1, 2016
Publication Date May 1, 2016
Deposit Date Mar 5, 2019
Peer Reviewed Peer Reviewed
Pages 48-49
Public URL https://nottingham-repository.worktribe.com/output/1608141
Publisher URL https://www.treasurers.org/ACTmedia/May16TThedging48%E2%80%9349.pdf