CEO Age, Risk Incentives, and Hedging Strategy

Ettore Croci, Alfonso Del Giudice, Håkan Jankensgård

Risultato della ricerca: Contributo in rivistaArticolo in rivistapeer review

16 Citazioni (Scopus)

Abstract

We test if managerial preferences explain how firms hedge using hand-collected data on derivative portfolios in the oil and gas industry. How firms hedge involves choosing between linear contracts and put options, and deciding whether to finance these hedging positions with cash-on-hand or by selling call options. The likelihood of being a hedger increases with CEO age, and near-retirement CEOs prefer linear hedging instruments. The predictions of the managerial risk incentives-theory of hedging strategy, according to which managers with convex compensation schemes would avoid hedging strategies that cap upside potential, find no support in the data.
Lingua originaleEnglish
pagine (da-a)686-716
Numero di pagine31
RivistaFinancial Management
Volume46
DOI
Stato di pubblicazionePubblicato - 2017

Keywords

  • CEO Age
  • Hedging policy
  • Risk-taking incentives

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