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Does a CEO’s hedging ability affect the firm’s capital structure?

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  • Lee M. Dunham

    (Creighton University)

Abstract

I examine whether a CEO’s composition of firm stockholdings between restricted and unrestricted shares impacts the amount of leverage carried by the firm. I document a negative and statistically significant relationship between leverage and the proportion of CEO total shareholdings that are unrestricted, and this negative relationship holds for alternative measures of leverage. This result supports the notion that the composition of a CEO’s portfolio of firm stock between restricted and unrestricted shares is a significant determinant of leverage ratios.

Suggested Citation

  • Lee M. Dunham, 2018. "Does a CEO’s hedging ability affect the firm’s capital structure?," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 42(3), pages 615-630, July.
    • Handle: RePEc:spr:jecfin:v:42:y:2018:i:3:d:10.1007_s12197-017-9415-9
    DOI: 10.1007/s12197-017-9415-9
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    References listed on IDEAS

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    1. Lee Dunham & Ken Washer, 2012. "The Ethics of Hedging by Executives," Journal of Business Ethics, Springer, vol. 111(2), pages 157-164, December.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Executive compensation; Managerial hedging; Firm risk; Restricted stock; Unrestricted stock; Capital structure;
    All these keywords.

    JEL classification:

    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy

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