CEO age, risk incentives, and hedging instrument choice
(2014) In Knut Wicksell Working Paper Series, Lund University 3.- Abstract
- We analyze how firms hedge in the oil and gas industry. Our main finding is that CEO age determines hedging behavior. The probability of being a hedger as well as the use of linear hedging strategies decreases with CEO age. These results are consistent with an argument that financial distress, which sends a negative signal of managerial ability, is relatively more costly to younger CEOs. We also investigate the vega-theory of hedging instrument choice, finding some support for a negative relationship between vega and a) the use of derivatives and b) hedging strategies that include the sale of call options.
Please use this url to cite or link to this publication:
https://lup.lub.lu.se/record/4469404
- author
- Croci, Ettore and Jankensgård, Håkan LU
- organization
- publishing date
- 2014
- type
- Working paper/Preprint
- publication status
- published
- subject
- keywords
- risk management, derivative, hedging instrument, vega, CEO age
- in
- Knut Wicksell Working Paper Series, Lund University
- volume
- 3
- pages
- 46 pages
- publisher
- Knut Wicksell Centre for Financial Studies, Lund University
- language
- English
- LU publication?
- yes
- id
- 1f9fea41-e566-4992-97ee-8e10031520ad (old id 4469404)
- alternative location
- http://swopec.hhs.se/luwick/abs/luwick2014_003.htm
- date added to LUP
- 2016-04-04 11:05:14
- date last changed
- 2018-11-21 21:02:35
@misc{1f9fea41-e566-4992-97ee-8e10031520ad, abstract = {{We analyze how firms hedge in the oil and gas industry. Our main finding is that CEO age determines hedging behavior. The probability of being a hedger as well as the use of linear hedging strategies decreases with CEO age. These results are consistent with an argument that financial distress, which sends a negative signal of managerial ability, is relatively more costly to younger CEOs. We also investigate the vega-theory of hedging instrument choice, finding some support for a negative relationship between vega and a) the use of derivatives and b) hedging strategies that include the sale of call options.}}, author = {{Croci, Ettore and Jankensgård, Håkan}}, keywords = {{risk management; derivative; hedging instrument; vega; CEO age}}, language = {{eng}}, note = {{Working Paper}}, publisher = {{Knut Wicksell Centre for Financial Studies, Lund University}}, series = {{Knut Wicksell Working Paper Series, Lund University}}, title = {{CEO age, risk incentives, and hedging instrument choice}}, url = {{http://swopec.hhs.se/luwick/abs/luwick2014_003.htm}}, volume = {{3}}, year = {{2014}}, }