| 1. |
- Croci, Ettore, et al.
(author)
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CEO age, risk incentives, and hedging instrument choice
- 2014
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Other publication (other academic/artistic)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 options.
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| 2. |
- Jankensgård, Håkan, et al.
(author)
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A Wall of Cash - The Investment Cash Flow-Sensitivity when Capital Becomes Abundant
- 2013
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Other publication (other academic/artistic)abstract
- In the mid 2000s the oil and gas industry was hit by what might be best described as a ‘wall of cash’ as oil prices successively reached new record levels and access to external financing improved greatly. In this article we investigate what this sudden abundance of liquidity implied for the investment-cash flow relationship, the interpretation of which continues to generate controversy in the financing constraints-literature. For small and financially constrained firms the investment-cash flow sensitivity decreases in the abundance period (2005-2008), suggesting that these firms became less financially constrained in this period. For large and financially unconstrained firms, however, the investment-cash flow sensitivity increases over time, suggesting that this relationship is driven by agency problems related to free cash flow. Our analysis illustrates the importance of a research design that addresses both these competing explanations of the investment-cash flow relationship.
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