دانلود رایگان مقاله انگلیسی ترجیحات ریسک پذیری مدیران و تصمیم گیری های مصون - الزویر 2018

Abstract

Theory and previous empirical studies suggest that CEO risk preferences affect hedging. We challenge this idea in a 5-year time series setting by using inside debt (i.e., CEO pension and deferred compensation) and the CEO Vega and CEO Delta, as proxies of CEO risk preferences, and document that neither risk-averse (i.e., debt like compensation) nor risk-seeking (i.e., convex compensation) inducing CEO compensation packages influence corporate hedging. Moreover, we find CEOs who have more previous work experience and high job tenure to be positively related to hedging.

Conclusion

Theory and previous empirical studies advocate that CEO risk preferences affect hedging. This paper questions this claim and investigates whether CEO managerial compensation and CEO characteristics affect corporate derivative hedging decisions in a 5-year time series setting in contrast to earlier studies relying on cross-sectional datasets. We find the CEO Vega and Delta to be statistically insignificant, before and after we control for endogeneity. None of the other CEO risk preference measures used (inside debt, CEO share compensation and cash compensation) are significant. Overall, our findings suggest that managerial risk preferences do not affect corporate hedging. Regarding the role of firm characteristics on hedging, we find no support for any of the three theories of Smith and Stulz (1985). Looking at managerial characteristics, we find that the CEO job-tenure exerts significant and positive impact on hedging suggesting that CEOs with longer job tenure tend to be more conservative and hedge more. In addition, the evidence shows that CEOs with more work experience before joining the current firm prefer to hedge more as a result of being less risk-tolerant. Overall, our findings help to understand why the results of the previous empirical literature on the relation between managerial risk preferences and derivative hedging are inconsistent. Not finding any of the managerial risk preference measures, used in our analysis over a 5-year period, to have a significant impact on hedging and not finding any of the three hedging theories of Smith & Stulz (1985) to be significant leads to the conclusion that the significant results uncovered in previous studies are more likely due to their focus on a specific year since they relied on cross-sectional data and/or focusing exclusively on currency derivatives than on all derivatives used by corporations to hedge interest rate and commodity risk.