Corporate Hedging and Optimal Disclosure
AbstractThis paper considers the issue of disclosure of hedging choices. It is shown that disclosure is the preferred choice of both managers and shareholders if it removes completely the informational asymmetry among the manager and the shareholders concerning the business opportunities and risks faced by them; the optimal reward cum insurance contract for the manager can thereby implemented. If the nature of feasible disclosure (that is credible) still leaves some informational asymmetries present, then with the renegotiation of managerial contracts at the interim date, it is possible to have the shareholders preferring nondisclosure, whereas the manager prefers to disclose at the (some) interim state(s), even though he might also prefer to commit to a policy of non-disclosure ex ante. These results are quite new relative to the extant literature on "hedge accounting", and take sophisticated account of the impact of optional contracts for managers, and renegotiations of these at the interim (post-disclosure) date.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Oxford Financial Research Centre in its series OFRC Working Papers Series with number 2000fe01.
Date of creation: 2000
Date of revision:
You can help add them by filling out this form.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Maxine Collett).
If references are entirely missing, you can add them using this form.