Knut Wicksell Working Paper Series, Knut Wicksell Centre for Financial Studies, Lund University
CEO Age, Risk Incentives and Hedging Instrument Choice
() and Håkan Jankensgård
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
Keywords: Vega; executive compensation; hedging; options; CEO age; (follow links to similar papers)
JEL-Codes: G30; G32; (follow links to similar papers)
46 pages, May 28, 2014
Before downloading any of the electronic versions below
you should read our statement on
for viewing Postscript files and the
Acrobat Reader for viewing and printing pdf files.
Full text versions of the paper:
Questions (including download problems) about the papers in this series should be directed to Frederik Lundtofte () or Niclas Andrén ()
Report other problems with accessing this service to Sune Karlsson ()
or Helena Lundin ().
Design by Joachim Ekebom