CEO Age, Risk Incentives, and Hedging Strategy
(2017) In Financial Management p.687-716- 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.
Please use this url to cite or link to this publication:
https://lup.lub.lu.se/record/3c2f482d-71ee-40c1-a5cf-ff2ab00afb97
- author
- Croci, Ettore ; del Guidice, Alfonso and Jankensgård, Håkan LU
- organization
- publishing date
- 2017
- type
- Contribution to journal
- publication status
- published
- subject
- keywords
- Vega, executive compensation, hedging, options, CEO age
- in
- Financial Management
- pages
- 687 - 716
- publisher
- Wiley-Blackwell
- external identifiers
-
- scopus:85028917211
- wos:000409200900005
- ISSN
- 0046-3892
- DOI
- 10.1111/fima.12166
- language
- English
- LU publication?
- yes
- id
- 3c2f482d-71ee-40c1-a5cf-ff2ab00afb97
- date added to LUP
- 2016-11-21 14:06:33
- date last changed
- 2022-07-11 04:30:54
@article{3c2f482d-71ee-40c1-a5cf-ff2ab00afb97, 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.<br/><br/>}}, author = {{Croci, Ettore and del Guidice, Alfonso and Jankensgård, Håkan}}, issn = {{0046-3892}}, keywords = {{Vega; executive compensation; hedging; options; CEO age}}, language = {{eng}}, pages = {{687--716}}, publisher = {{Wiley-Blackwell}}, series = {{Financial Management}}, title = {{CEO Age, Risk Incentives, and Hedging Strategy}}, url = {{http://dx.doi.org/10.1111/fima.12166}}, doi = {{10.1111/fima.12166}}, year = {{2017}}, }