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Litigation Risk and Hedging

Firms operating in the United States face important litigation risk, yet little is known on how this risk affects financial decisions. I use a natural experiment to explore the effect of litigation risk on firms' hedging behavior. I find that firms are more likely to use financial derivatives following an exogenous increase in litigation risk. This finding is stronger in the subset of firms with higher distress costs, lower credit ratings, and higher legal concerns. My results imply that litigation risk can at least partially explain the use of financial derivatives.

Identiferoai:union.ndltd.org:arizona.edu/oai:arizona.openrepository.com:10150/621281
Date January 2016
CreatorsAlkhamis, Mohammad Bader, Alkhamis, Mohammad Bader
ContributorsKlasa, Sandy, Klasa, Sandy, Aradhyula, Satheesh, Bonaime, Alice, Williams, Ryan
PublisherThe University of Arizona.
Source SetsUniversity of Arizona
Languageen_US
Detected LanguageEnglish
Typetext, Electronic Dissertation
RightsCopyright © is held by the author. Digital access to this material is made possible by the University Libraries, University of Arizona. Further transmission, reproduction or presentation (such as public display or performance) of protected items is prohibited except with permission of the author.

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