Managerial Stock Options and the Hedging Premium

Niclas Hagelin · Martin Holmén · John D. Knopf · Bengt Pramborg

35 citations0/0 files storedEuropean Financial Management

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Risk Management in Financial Firms Corporate Finance and Governance Stochastic processes and financial applications

Abstract

Abstract Previous studies have found mixed evidence on whether hedging increases firm value. Some studies have shown that managerial incentives may influence firm hedging. In this paper we provide evidence that when hedging is based upon incentives from managers' options, firm value decreases.

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1996Agency costs of free cash flow, corporate finance, and takeovers 1986Large Shareholders and Corporate Control 1988Management ownership and market valuation 2003Founding‐Family Ownership and Firm Performance: Evidence from the S&P 500 1990Additional evidence on equity ownership and corporate value 1985The Determinants of Firms' Hedging Policies 1993Risk Management: Coordinating Corporate Investment and Financing Policies 2002Estimating the Value of Employee Stock Option Portfolios and Their Sensitivities to Price and Volatility

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