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Dresden Discussion Paper Series in Economics, Faculty of Business and Economics, TU Dresden >
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http://hdl.handle.net/10419/22747
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| Title: | | Differential Taxation and Corporate Futures-Hedging  |
| Authors: | | Wahl, Jack E. Broll, Udo |
| Issue Date: | | 2007 |
| Series/Report no.: | | Dresden discussion paper in economics 06/07 |
| Abstract: | | Using a two-moment decision model this paper analyzes corporate hedging behavior in the presence of unified and differential income taxation. We start with the well-known result that risk-taking may increase when income tax rates increase and, therefore, the incentive for hedging reduces. We demonstrate that pure hedging is differently affected by taxation than speculative hedging is. Analysing tax-sensitivity of the corporate hedge shows that a higher risk in the first place may reduce the tax-induced incentive to revise a futures position. |
| Subjects: | | taxation hedging mean-variance model unified and differential taxation Roy preference function |
| JEL: | | F31 F21 H20 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Dresden Discussion Paper Series in Economics, Faculty of Business and Economics, TU Dresden
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