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Cover von: Differential Taxation and Corporate Futures-Hedging
Jack E. Wahl, Udo Broll

Differential Taxation and Corporate Futures-Hedging

Rubrik: Articles
Jahrgang 63 (2007) / Heft 4, S. 583-590 (8)
Publiziert 09.07.2018
DOI 10.1628/001522107X269032
Veröffentlicht auf Englisch.
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Beschreibung
Using a two-moment decision model, this paper analyzes corporate hedging behavior in the presence of differential versus unified 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 decreases. We demonstrate that pure hedging is differently affected by taxation from the way speculative hedging is. Analyzing the 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.