Financial hedging and corporate investment

Building on the well-documented relationship between corporate financial hedging and firms' borrowing costs, this study examines impact of utilizing derivative instruments investment. We document that engaging in enables firms to pursue more inorganic growth opportunities form M&As. Acquiring with programs have a lower cost are likely pay for their deals cash use external borrowing. While serves as vehicle bring investment plans fruition by facilitating financing, it also leads inferior choices when conflicts interest among managers shareholders arise. Our shows first time flexibility emanating from can give rise agency costs instigating entrenched overinvest.