Hedging Around a CEO Change: Further Evidence from the Oil and Gas Industry

Abstract

This study examines hedging activities around hiring of chief executive officer (CEO). Data on the use of derivatives by a sample of oil and gas firms were hand collected from the 10-k filings and compared for several years before and after a CEO change. A regression method was employed to examine if hedging is associated with the CEO change after controlling for the effects of hedging variables. The findings show that net hedging decreased from three years prior to CEO hiring and increased for several years thereafter. The regression results show that hiring of a new CEO explains change in hedging one year after the CEO is hired when interactions among the explanatory variables are considered. This is one of the few studies that examine the relationship between hedging behavior and CEO change.