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Managerial Career Concerns and Risk Management

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  • Jouahn Nam
  • Jun Wang
  • Ge Zhang

Abstract

We present a dynamic model of corporate risk management and managerial career concerns. We show that managers with low (high) initial reputation have high (low) career concerns about keeping their jobs and receiving all future income. These managers are more likely to speculate (hedge) early in their careers. In the later stage of their careers when managers have less career concerns, there is no speculative motive for self interested managers. On the other hand, highly reputable managers have minimal career concerns and they engage in neither hedging nor speculation early in their careers, but they may choose to hedge after poor early performance.

Suggested Citation

  • Jouahn Nam & Jun Wang & Ge Zhang, 2008. "Managerial Career Concerns and Risk Management," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 75(3), pages 785-809, September.
    • Handle: RePEc:bla:jrinsu:v:75:y:2008:i:3:p:785-809
    DOI: 10.1111/j.1539-6975.2008.00284.x
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    References listed on IDEAS

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    Cited by:

    1. Peng Wang & Yuanxin Zheng & Mingzhu Zhang & Kexin Yin & Fei Geng & Fangxiao Zheng & Junchi Ma & Xiaojie Wu, 2024. "Methods for measuring career readiness of high school students: based on multidimensional item response theory and text mining," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-15, December.
    2. David L. Eckles & Martin Halek, 2010. "Insurer Reserve Error and Executive Compensation," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 77(2), pages 329-346, June.
    3. Cheng, Lingsha & Cheung, Adrian (Waikong), 2021. "Is there a dark side of managerial ability? Evidence from the use of derivatives and firm risk in China," Journal of Contemporary Accounting and Economics, Elsevier, vol. 17(2).
    4. Imes, Matthew & Anderson, Ronald, 2021. "Executive risk-taking and the agency cost of debt," Journal of Empirical Finance, Elsevier, vol. 64(C), pages 78-94.
    5. Zero Deng & J. Jimmy Yang, 2023. "Corporate reputation and hedging activities," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(S1), pages 1223-1247, April.

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