We analyze how managerial risk preferences influence firms’ hedging instrument choice in the oil and gas industry. CEO age determines hedging behaviour: the probability of being a hedger as well as the use of linear hedging strategies decreases with CEO age. These findings 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.
Croci, E., Jankensgård, H., CEO Age, Risk Incentives and Hedging Instrument Choice, Contributed paper, in N/A, (Maastricht, 12-13 June 2014), N/A, N/A 2014: N/A-N/A [http://hdl.handle.net/10807/51363]
CEO Age, Risk Incentives and Hedging Instrument Choice
Croci, Ettore;
2014
Abstract
We analyze how managerial risk preferences influence firms’ hedging instrument choice in the oil and gas industry. CEO age determines hedging behaviour: the probability of being a hedger as well as the use of linear hedging strategies decreases with CEO age. These findings 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.
I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
