CFO Pay Convexity, Risk Taking and Corporate Hedging

Massimiliano Barbi, Valentina Febo () and I. Massimiliani
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Valentina Febo: Métis Lab EM Normandie - EM Normandie - École de Management de Normandie = EM Normandie Business School

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Abstract: We study how a CFO's risk-taking incentives affect corporate hedging by utilising hand-collected data from 2009 to 2019 on corporate hedging and managerial compensation for a sample of US oil and gas firms. The relative convexity of CFO equity compensation negatively affects the likelihood and extent of hedging. When the CFO and CEO have diverging risk-taking incentives, the relative convexity of the CFO's equity payoff prevails over that of the CEO. This evidence underscores the primary role of the CFO in steering a firm's hedging strategy. \textcopyright 2023 John Wiley & Sons Ltd.

Keywords: CFO; compensation; derivatives; hedging (search for similar items in EconPapers)
Date: 2023
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Published in European Financial Management, 2023, ⟨10.1111/eufm.12455⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04434018

DOI: 10.1111/eufm.12455

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