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Why Do Firms Engage in Selective Hedging? Evidence from the Gold Mining Industry

Tim R. Adam, Chitru S. Fernando and Jesus M. Salas
Additional contact information
Tim R. Adam: Humboldt University of Berlin
Chitru S. Fernando: University of OK
Jesus M. Salas: Lehigh University

Working Papers from University of Pennsylvania, Wharton School, Weiss Center

Abstract: The widespread practice of managers speculating by incorporating their market views into firms' hedging programs ("selective hedging") remains a puzzle. Using a 10-year sample of North American gold mining firms, we find no evidence that selective hedging is more prevalent among firms that are believed to possess an information advantage. In contrast, we find strong evidence that selective hedging is more prevalent among financially constrained firms, suggesting that this practice is driven by asset substitution motives. We detect weak relationships between selective hedging and some corporate governance measures but find no evidence of a link between selective hedging and managerial compensation.

JEL-codes: G11 G14 G32 G39 (search for similar items in EconPapers)
Date: 2015-06
New Economics Papers: this item is included in nep-cse and nep-ger
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Persistent link: https://EconPapers.repec.org/RePEc:ecl:upafin:15-07

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