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Managerial Ownership and Corporate Hedging


  • Marcello Spanò

    Corresponding author
    1. The author is from Dipartimento di Economia, Università dell'Insubria, Varese, Italy. The earlier version of this paper is based on part of his PhD thesis at the University of York, UK.
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  • He is very grateful to John Hutton, Peter Simmons, Aydin Ozkan, Antonios Antoniou, Peter Spencer, and to the anonymous referee for valuable comments and suggestions on the improvement of the quality of the paper. He is also grateful to Les Godfrey and William Greene for the support of their knowledge on the use of the econometric technique. He accepts sole responsibility for any remaining errors.

* Address for correspondence: Marcello Spanò, Dipartimento di Economia, Università dell'Insubria, Via Monte Generoso, 71, 21100 Varese, Italy.


Abstract:  Using information on 443 UK non-financial companies, this work provides evidence supporting the hypothesis that managerial risk aversion is an incentive to deviate from the optimal hedging position. Conflicts of interest between shareholders and managers are at the centre of the decision about the firm's risk profile but are not relevant as determinants of the decision to hedge. This is rather associated with factors enhancing the firm's expected value (underinvestment, scale economies, tax savings).