REP Research Seminar - Presenting in person - Dr Ricardo Lopez from Syracuse University - Title: "Tax Constraints to Corporate Hedging".

This is an internal seminar and attendees should use their University email account to join the meeting if they are joining via MS Teams. You are welcome to share this invite internally but please do not share it beyond the University. Please direct any enquiries from those outside of the University to: repschooloffice@reading.ac.uk.

Abstract:

Theory suggests that tax convexity incentivizes hedging, but empirical support is limited. This might occur because derivatives can generate taxable income, which disincentivizes hedging. We study how the tax treatment of derivatives income affects hedging in real estate investment trusts and non-financial firms. To avoid taxes, REITs’ revenue must be from real estate. Pre-2004, close-out derivatives income constituted non-real estate revenue, increasing taxation risk. When the Jobs Act excluded derivatives income from non-real estate revenue, hedging, borrowing, and investment increased for higher taxation-risk firms. We find comparable results for non-financial firms following a reduction in taxable derivatives income with IRS-Regulation-107047-00.

Bio:

I am currently an Assistant Professor of Finance at the Martin J. Whitman School of Management in Syracuse University. I earned my PhD degree in Finance from the Stockholm School of Economics in Sweden. My main research interests lie in the Asset Pricing field and include Empirical Asset Pricing, Empirical Option Pricing, Financial Econometrics, and Risk Management. My current research is focused on the relationship between risk and asset prices. More specifically, I am interested in understanding the relationship between different types of risk (e.g. downside risk) and the cross-section of different asset classes including stocks, corporate bonds, credit default swaps, options, and residential real estate.