Date of this Version
The Journal of Finance
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.
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.
Geczy, C. C., Minton, B. A., & Schrand, C. M. (2007). Taking a View: Corporate Speculation, Governance, and Compensation. The Journal of Finance, 62 (5), 2405-2443. http://dx.doi.org/10.1111/j.1540-6261.2007.01279.x
Date Posted: 27 November 2017
This document has been peer reviewed.