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Who Manages Risk? An Empirical Examination of Risk Management Practices in the Gold Mining Industry



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    • Harvard Business School. I would like to thank Bruno Biais, Jamil Baz, Sanjiv Das, Ken Froot, William Greene, Josh Lerner, Steve Kaplan, Tim Opler, André Perold, Rick Ruback, René Stulz (the editor), an anonymous referee, and seminar participants at Virginia Tech, Ohio State University, the Center for Research in Security Prices, Harvard Business School, the National Bureau for Economic Research Summer Institute, the 1995 AFA conference, and the UCLA Conference on Corporate Risk Management for their comments on this research. I gratefully acknowledge the cooperation of Ted Reeve who allowed me to use his surveys of gold mining firms' risk management activities. B. J. Whalen and Jonathan Headley provided invaluable research support. The Division of Research at Harvard Business School provided financial support for this research, which was completed as part of the Global Financial Systems project.


This article examines a new database that details corporate risk management activity in the North American gold mining industry. I find little empirical support for the predictive power of theories that view risk management as a means to maximize shareholder value. However, firms whose managers hold more options manage less gold price risk, and firms whose managers hold more stock manage more gold price risk, suggesting that managerial risk aversion may affect corporate risk management policy. Further, risk management is negatively associated with the tenure of firms' CFOs, perhaps reflecting managerial interests, skills, or preferences.

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