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Does having previous working experiences in finance affect corporate hedging decisions made by the CEO? - a study on U.S. oil and gas producers

Sakdanupong, Peera LU and Seow, Jeremy LU (2018) BUSN79 20181
Department of Business Administration
Abstract
The purpose of this thesis is to investigate if a CEO with finance and accounting working experiences would affect corporate hedging decisions, in terms of the decision to hedge, the extent of hedging, and the type of hedging tools used.
This thesis uses panel data regressions where the hedge ratio, binary hedging decisions and hedging types are dependent variables, controlled by independent variables such as a dummy variable for CEOs with finance working experience, various CEO characteristics, and firm-level variables. The sample used in this study consists of 187 publicly traded oil and gas producers in the US (SIC code 1311) between Q4 2012 and Q3 2016.
CEO financial working experience does seem to play an important part in the... (More)
The purpose of this thesis is to investigate if a CEO with finance and accounting working experiences would affect corporate hedging decisions, in terms of the decision to hedge, the extent of hedging, and the type of hedging tools used.
This thesis uses panel data regressions where the hedge ratio, binary hedging decisions and hedging types are dependent variables, controlled by independent variables such as a dummy variable for CEOs with finance working experience, various CEO characteristics, and firm-level variables. The sample used in this study consists of 187 publicly traded oil and gas producers in the US (SIC code 1311) between Q4 2012 and Q3 2016.
CEO financial working experience does seem to play an important part in the hedging decisions of oil and gas firms. The results on the decision to hedge is negatively correlated to CEOs with financial training and experience, but the results on the extent of production hedged are weaker and insignificant, although it also seems to show a negative correlation with having financial training and experience. Further testing results for hedging instruments of choice point out that 3-way collar strategy is more preferred by finance trained CEOs, while a linear strategy is less preferred. Hence, the results would support the hypothesis that finance trained CEOs are less likely to hedge, and if they do hedge, they prefer hedging tools that can preserve upside potential. Possible reasons are that they are more financially sophisticated and make their hedging decisions based on experience, thus, they value hedging less and prefer hedging instruments with less hedging intensity. (Less)
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author
Sakdanupong, Peera LU and Seow, Jeremy LU
supervisor
organization
course
BUSN79 20181
year
type
H1 - Master's Degree (One Year)
subject
keywords
Hedging, Hedge ratio, Chief executive officers, CEO characteristics, CEO risk preferences, Finance career
language
English
id
8946059
date added to LUP
2018-06-27 14:31:02
date last changed
2018-06-27 14:31:02
@misc{8946059,
  abstract     = {{The purpose of this thesis is to investigate if a CEO with finance and accounting working experiences would affect corporate hedging decisions, in terms of the decision to hedge, the extent of hedging, and the type of hedging tools used.
This thesis uses panel data regressions where the hedge ratio, binary hedging decisions and hedging types are dependent variables, controlled by independent variables such as a dummy variable for CEOs with finance working experience, various CEO characteristics, and firm-level variables. The sample used in this study consists of 187 publicly traded oil and gas producers in the US (SIC code 1311) between Q4 2012 and Q3 2016.
CEO financial working experience does seem to play an important part in the hedging decisions of oil and gas firms. The results on the decision to hedge is negatively correlated to CEOs with financial training and experience, but the results on the extent of production hedged are weaker and insignificant, although it also seems to show a negative correlation with having financial training and experience. Further testing results for hedging instruments of choice point out that 3-way collar strategy is more preferred by finance trained CEOs, while a linear strategy is less preferred. Hence, the results would support the hypothesis that finance trained CEOs are less likely to hedge, and if they do hedge, they prefer hedging tools that can preserve upside potential. Possible reasons are that they are more financially sophisticated and make their hedging decisions based on experience, thus, they value hedging less and prefer hedging instruments with less hedging intensity.}},
  author       = {{Sakdanupong, Peera and Seow, Jeremy}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{Does having previous working experiences in finance affect corporate hedging decisions made by the CEO? - a study on U.S. oil and gas producers}},
  year         = {{2018}},
}