This paper studies the interplay between firm investment and cash flow hedging decisions when the decision-maker has time-inconsistent preferences. We show that cash flow hedging acts as a double-edged sword. In some cases, cash flow hedging enhances firm value because the firm can thus invest...

I employ a dynamic multi-equation model in which firms make interdependent financing and investment decisions under the constraint that sources and uses of cash must be equal. In this setting, R&D-cash flow sensitivities for young and mature high-tech firms are both small and indistinguishable...