Managerial Career Concerns and Risk Management

25 Pages Posted: 5 Aug 2008

See all articles by Jouahn Nam

Jouahn Nam

Pace University - Lubin School of Business

Jun Wang

City University of New York, Baruch College - Zicklin School of Business - Department of Economics and Finance

Ge Zhang

Long Island University

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

Nam, Jouahn and Wang, Jun and Zhang, Ge, Managerial Career Concerns and Risk Management. Journal of Risk & Insurance, Vol. 75, Issue 3, pp. 785-809, September 2008. Available at SSRN: https://ssrn.com/abstract=1202452 or http://dx.doi.org/10.1111/j.1539-6975.2008.00284.x

Jouahn Nam (Contact Author)

Pace University - Lubin School of Business ( email )

1 Pace Plaza
New York, NY 10038-1502
United States
212-346-1818 (Phone)
212-346-1573 (Fax)

Jun Wang

City University of New York, Baruch College - Zicklin School of Business - Department of Economics and Finance ( email )

17 Lexington Avenue
New York, NY 10010
United States

Ge Zhang

Long Island University ( email )

720 Northern Boulevard
Brookville, 11548-1327
United States

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