Monitoring mechanisms, managerial incentives, investment distortion costs, and derivatives usage

Huang, Jingjing, Su, Chen, Joseph, Nathan L. and Gilder, Dudley ORCID: https://orcid.org/0000-0001-7039-762X 2018. Monitoring mechanisms, managerial incentives, investment distortion costs, and derivatives usage. British Accounting Review 50 (1) , pp. 93-141. 10.1016/j.bar.2017.11.004

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Abstract

We relate derivatives usage to the level of corporate governance/monitoring mechanisms, managerial incentives and investment decisions of UK firms. We find evidence to suggest that the monitoring environment, e.g., board size, influences both currency and interest rate derivatives usage. Managerial compensation plans also influence derivatives usage. Investment decisions are affected by the governance and managerial compensation plans of firms, which in turn impact on derivatives usage. We find a strong tendency for UK firms to reduce derivatives usage in situations where derivatives usage should be increased. There is limited evidence that firms use hedging substitutes to avoid monitoring from external capital markets.

Item Type:	Article
Date Type:	Publication
Status:	Published
Schools:	Business (Including Economics)
Publisher:	Elsevier
ISSN:	0890-8389
Date of Acceptance:	19 November 2017
Last Modified:	07 Nov 2022 09:43
URI:	https://orca.cardiff.ac.uk/id/eprint/130053

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