Taking a View: Corporate Speculation, Governance, and Compensation

Loading...
Thumbnail Image
Penn collection
Accounting Papers
Degree type
Discipline
Subject
Accounting
Business Administration, Management, and Operations
Funder
Grant number
License
Copyright date
Distributor
Related resources
Author
Geczy, Christopher C
Minton, Bernadette A
Schrand, Catherine M
Contributor
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.

Advisor
Date Range for Data Collection (Start Date)
Date Range for Data Collection (End Date)
Digital Object Identifier
Series name and number
Publication date
2007-10-01
Journal title
The Journal of Finance
Volume number
Issue number
Publisher
Publisher DOI
Journal Issue
Comments
Recommended citation
Collection