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Comments: CEO hedging opportunities and the weighting of performance measures in compensation.

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Presentation on theme: "Comments: CEO hedging opportunities and the weighting of performance measures in compensation."— Presentation transcript:

1 Comments: CEO hedging opportunities and the weighting of performance measures in compensation

2 The paper explores the effects of CEO hedging opportunities (or hedging costs) and performance on compensation. When managers can perfectly hedge firm specific risk, the interests of managers and shareholders are not aligned. Two main regression models are proposed for the empirical study.

3 Comments: – This paper is seeking to answer a reasonably interesting question in quite an interesting setting. – However, I believe there are a number of serious limitations in this paper, including the hypothesis development, the choice of sample, the empirical methodology, and the interpretation of the results. – My specific concerns are contained in my review. – The authors need to better develop their hypotheses. The paper only explores the effects of CEO hedging opportunities and performance on compensation. But some of the arguments are based on theory related to the effect of compensation on performance.

4 The theoretical underpinning needs to be strengthened. – The hypothesis development Provides a better link between the empirical results and hypotheses. – The assumption of CEO Hedge Bettis et al (2001) report only 30% of executives hedge. Measures of executive hedge vs hedge opportunities. The contribution of the paper needs to be more clearly identified.


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