Accounting Papers

Document Type

Journal Article

Date of this Version

10-2007

Publication Source

The Journal of Finance

Volume

62

Issue

5

Start Page

2405

Last Page

2443

DOI

10.1111/j.1540-6261.2007.01279.x

Abstract

Using responses to a well-known confidential survey, we study corporations' use of derivatives to “take a view” on interest rate and currency movements. Characteristics of speculators suggest that perceived information and cost advantages lead them to take positions actively; that is, they do not speculate to increase risk by “betting the ranch.” Speculating firms encourage managers to speculate through incentive-aligning compensation arrangements and bonding contracts, and they use derivatives-specific internal controls to manage potential abuse. Finally, we examine whether investors reading public corporate disclosures are able to identify firms that indicate speculating in the confidential survey; they are not.

Copyright/Permission Statement

This is the peer reviewed version of the following article: GÉCZY, C. C., MINTON, B. A. and SCHRAND, C. M. (2007), Taking a View: Corporate Speculation, Governance, and Compensation. The Journal of Finance, 62: 2405–2443., which has been published in final form at DOI: 10.1111/j.1540-6261.2007.01279.x This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving http://olabout.wiley.com/WileyCDA/Section/id-820227.html#terms.

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Date Posted: 27 November 2017

This document has been peer reviewed.