CEO age, risk incentives, and hedging instrument choice
Författare
Summary, in English
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.
Avdelning/ar
Publiceringsår
2014
Språk
Engelska
Publikation/Tidskrift/Serie
Knut Wicksell Working Paper Series, Lund University
Volym
3
Länkar
Dokumenttyp
Working paper
Förlag
Knut Wicksell Centre for Financial Studies, Lund University
Ämne
- Business Administration
Nyckelord
- risk management
- derivative
- hedging instrument
- vega
- CEO age
Status
Published