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| Author: | Graham, J. Smith, C. Jr. |
| Title: | Tax incentives to hedge |
| Journal: | Journal of Finance
1999 : DEC, VOL. 54:6, p. 2241-2262 |
| Index terms: | FINANCE HEDGING INCENTIVES |
| Language: | eng |
| Abstract: | For corporations facing tax-function convexity, hedging lowers expected tax liabilities, thereby providing an incentive to hedge. The authors use simulation methods to investigate convexity indiced by tax-code provisions. On average, the tax function is convex . Carrybacks and carry forwards increase the range of income with incentives to hedge, other average tax savings from a five percent reduction in the volatility of taxable income are about 5.4 percent of expected tax liabilities. |
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