We examine the use of currency derivatives in order to differentiate among existing theories of hedging behavior. Firms with greater growth opportunities and tighter financial constraints are more likely to use currency derivatives. This result suggests that firms might use derivatives to reduce cash flow variation that might otherwise preclude firms from investing in valuable growth opportunities. Firms with extensive foreign exchange-rate exposure and economies of scale in hedging activities are also more likely to use currency derivatives. Finally, the source of foreign exchange-rate exposure is an important factor in the choice among types of currency derivatives. AbstractWe examine ftrms' use of currency derivatives to in order to differentiate among ex isting theories

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We show that higher cash flow volatility is associated with lower average levels of investment in capital expenditures, R&D, and advertising. This association suggests that firms do not use external capital markets to fully cover cash flow shortfalls but rather permanently forgo investment. Cash flow volatility also is associated with higher costs of accessing external capital. Moreover, these higher costs, as measured by some proxies, imply a greater sensitivity of investment to cash flow volatility. Thus, cash flow volatility not only increases the likelihood that a firm will need to access capital markets, it also increases the costs of doing so. The Impact of Cash Flow Volatility on Discretionary Investment and the Costs of Debt and Equity Financing AbstractWe document that cash flow volatility is associated with lower levels of investment in capital expenditures, R&D, and advertising. Thus, firms do not turn to external capital markets to fully cover cash-flow short falls. Consistent with this co nclusion, we document that the sensitivity of investment to cash flow volatility is greater for firms with higher costs of capital market access. In addition, cash flow and earnings volatility are associated with these higher costs. Thus, v olatility not only increases the likelihood that a firm will need to access capital markets, it also increases the costs of doing so.

We study CEO turnover -both internal (board driven) and external (through takeover and bankruptcy) -from 1992 to 2005 for a sample of large U.S. companies. Annual CEO turnover is higher than that estimated in previous studies over earlier periods. Turnover is 15.6% from 1992 to 2005, implying an average tenure as CEO of less than seven years. In the more recent period since 1998, total CEO turnover increases to 17.4%, implying an average tenure of less than six years. Internal turnover is significantly related to three components of firm stock performance -performance relative to industry, industry performance relative to the overall market, and the performance of the overall stock market. The relations are stronger in the more recent period since 1998. We find similar patterns for both forced and unforced turnover, suggesting that some turnover labeled as unforced is actually not voluntary. There is some evidence that the increases in turnover and turnover-performance sensitivity are related to increases in block shareholder ownership, board independence, and Sarbanes-Oxley. The increases in turnover are not related to shareholder rights or corporate fraud. External turnover is not significantly related to any of the measures of stock performance over the entire sample period, or over the two sub-periods.