Transcript Comments: CEO hedging opportunities and the weighting of

Comments: CEO hedging opportunities and the weighting
of performance measures in compensation
• The paper explores the effects of CEO hedging
opportunities (or hedging costs) and
performance on compensation.
• When managers can perfectly hedge firm
specific risk, the interests of managers and
shareholders are not aligned.
• Two main regression models are proposed for
the empirical study.
• Comments:
– This paper is seeking to answer a reasonably
interesting question in quite an interesting setting.
– However, I believe there are a number of serious
limitations in this paper, including the hypothesis
development, the choice of sample, the empirical
methodology, and the interpretation of the results.
– My specific concerns are contained in my review.
– The authors need to better develop their hypotheses.
• The paper only explores the effects of CEO hedging
opportunities and performance on compensation.
• But some of the arguments are based on theory related to
the effect of compensation on performance.
• The theoretical underpinning needs to be
strengthened.
– The hypothesis development
• Provides a better link between the empirical results and
hypotheses.
– The assumption of CEO Hedge
• Bettis et al (2001) report only 30% of executives hedge.
• Measures of executive hedge vs hedge
opportunities.
• The contribution of the paper needs to be more
clearly identified.