Please use this identifier to cite or link to this item: http://hdl.handle.net/10125/59292

Corporate Derivatives as a Manager-Specific Investment

File Size Format  
HARC 2019 paper 97.pdf 35.24 MB Adobe PDF View/Open

Item Summary

Title:Corporate Derivatives as a Manager-Specific Investment
Authors:Brooks, Robert
Mobbs, Shawn
Pollard, Troy
Keywords:Corporate derivatives
Manager-specific investment
Corporate control
Governance
Date Issued:29 Aug 2018
Abstract:This study examines one manager-specific investment, the use of derivatives, and the corresponding market for corporate control. We find firms with large derivatives positions or increases in their unrealized derivatives gains are associated with a significantly lower likelihood of being the target of an acquisition. We further find firms with greater magnitude of derivatives are associated with weaker boards. Consistent with derivatives being used by managers to protect themselves from disciplinary forces, we find the absolute size of firms’ unrealized derivatives value is negatively associated with firm value. Finally, firms with decreasing (increasing) idiosyncratic risk as well as increasing (decreasing) absolute value of changes in derivatives realized gains and losses, exhibit a decreasing (increasing) likelihood of takeovers. In summary, the findings are consistent with derivatives being an example of a manager-specific investment (Shleifer and Vishny (1989)) that is successful at entrenching management.
URI:http://hdl.handle.net/10125/59292
Appears in Collections: 16 Financial: Debt and derivative instruments/Creditor protection/Risk management


Please email libraryada-l@lists.hawaii.edu if you need this content in ADA-compliant format.

Items in ScholarSpace are protected by copyright, with all rights reserved, unless otherwise indicated.