Table A.1 Variables Definition
Variable name Variable definition
Panel A : General characteristics of the firm and the market
Hedge ratio is the delta of the risk management portfolio held by the firm divided by its expected produc-tion. The variable is measured at the quarter end.
Ln(size) is the market value of assets defined as (the number of common shares outstanding multi-plied by the end-of-year price per share) plus the book value of assets minus the book value of equity. We use the logarithm of the firm size.
M arket to book is the market value of total assets divided by the book value of assets.
Leverage is the total debt divided by the total of common equity plus preferred stocks.
Quick ratio is the value of the cash on hand, short term investments and clients’ accounts divided by the short term liabilities.
Dividend policy is a dummy variable equal to one if a firm pays cash dividends, and zero otherwise.
T ax save is the expected percentage savings in tax arising from a 5% drop in the volatility of taxable income (more details in Appendix B). The computation is based on annual data. To obtain quarterly data, we assume the same value of tax advantages during the four quarters of the year.
U S dummy is a dummy variable equal to one if the firm is a US firm, and zero otherwise.
%inst is the percentage of shares held by institutions.
%blockholders is the percentage of shares held by blockholders (i.e. a non managerial shareholder holding more than 10% of the firm’s shares, Tufano (1996)).
Exploration is the firm exploration expenditures scaled the firm market value.
Cash cost is the operating cost of producing one ounce of gold, excluding all non-cash items such as depreciation, amortization and other financial costs.
Gold price is the price of one ounce of gold in the spot market.
Panel B : General characteristics of directors and CEOs
CEO age is the age of the CEO (years).
CEO tenure is a dummy variable equal to one if the CEO is tenure as CEO, and zero otherwise.
CEO COB is a dummy variable equal to one if the CEO is the chairman of the board, and zero otherwise.
CEO change is a dummy variable equal to one if the CEO changed during the year, and zero otherwise.
CEO CS is the net value of the common shares of the firm held by the CEO (millions, USD).
V alCEO op is the value of exercisable options held by the CEO (millions, USD).
V alAll op is the value of exercisable options held by all directors (millions, USD).
Cash f ee outsiders is the cash fee paid for each meeting to outside directors (thousands, USD).
Annual f ixed f ee is the annual fixed fee paid for each meeting to outside directors (thousands, USD).
CEO Bachelor is a dummy variable equal to one if the CEO has a bachelor degree in finance and zero otherwise.
CEO High Edu is a dummy variable equal to one if the CEO has a Master degree or a PhD in finance and zero otherwise.
Table A.1 (Continued)
Variable name Variable definition
Panel C : Characteristics and financial background of directors
M in size is a dummy variable equal to one if there is a minimum of three directors sitting on the audit committee, and zero otherwise.
T ot indep is a dummy variable equal to one if all directors sitting on the audit committee are unrelated directors, and zero otherwise.
M aj indep is a dummy variable equal to one if the majority of directors sitting on the board are unre-lated, and zero otherwise.
%indep is the proportion of unrelated directors sitting on the board. We divide the number of unre-lated directors by the size of the board.
i F in know is a dummy variable equal to one if at least one (i=One) or all (i=All) director sitting on the audit committee are financially literate, and zero otherwise.
i Act Edu Acc is a dummy variable equal to one if i director(s) sitting on the audit committee or the board are financially active, educated, and have an accounting background, and zero otherwise.
i Act Edu N otAcc is a dummy variable equal to one if i director(s) sitting on the audit committee or the board are financially active, educated, and do not have an accounting background, and zero other-wise.
i Act N otEdu N otAcc is a dummy variable equal to one if i director(s) sitting on the audit committee or the board are financially active, but are not financially educated, and do not have an accounting back-ground, and zero otherwise.
i N otAct Edu Acc is a dummy variable equal to one if i director(s) sitting on the audit committee or the board are not financially active, but are educated, and have an accounting background, and zero otherwise.
i N otAct Edu N otAcc is a dummy variable equal to one if i director(s) sitting on the audit committee or the board are educated, but are not financially active, and do not have an accounting background, and zero otherwise.
%Bachelor is the percentage of directors sitting on the board or the audit committee with a Bachelor degree.
%High Edu is the percentage of directors sitting on the board or the audit committee with a Master or a PhD degree. The percentage is relative to the size of the committee.
N um High Edu is the number of directors sitting on the board or the audit committee with a Master or a PhD degree.
i Acc is a dummy variable equal to one if i director(s) sitting on the board or the audit committee have an accounting background, and zero otherwise.
∗i=One, when we consider at least one director and i=%, when we consider the percentage of directors.
Table A-2 Descriptive statistics.
This table reports summary statistics (number of observations, mean, median, standard deviation, mini-mum, and maximum) of all the variables in our analysis. The variable definitions are reported in Appendix A.
For the hedge ratio, we report i) the continuous hedge ratio variable for all firms, ii) a dummy variable equal to one if the firm hedges and zero otherwise, and iii) a positive hedge ratio variable for firms that hedge.
Variables N Mean Median Std Dev. Min Max
Panel A: Dependent variables
Hedge Ratio(all f irms) 348 0.25 0.14 0.30 0.00 1.26
Hedge Ratio(a dummy) 348 0.84 1.00 0.36 0.00 1.00
Hedge Ratio(f irms that hedge) 294 0.30 0.17 0.30 0.00a 1.26 Panel B: General characteristics of the firms
Ln(size) 344 6.50 6.43 1.49 3.00 9.37
M arket to Book 344 1.76 1.64 0.92 0.42 6.00
Leverage 343 0.49 0.30 0.57 0.00 3.64
Quick Ratio 348 3.03 2.08 2.63 0.01 13.50
Dividend P olicy 348 0.76 1.00 0.43 0.00 1.00
T ax Save 348 0.14 0.05 0.26 0.00 2.18
%Inst 348 0.08 0.06 0.09 0.00 0.40
%Blockholders 348 0.18 0.11 0.26 0.00 0.91
Exploration(×102) 348 0.36 0.24 0.99 0.00 17.39
Cash Cost 348 246.07 234.00 64.70 116.00 491.00
Gold Price 348 335.75 333.65 42.25 280.45 394.90
U S dummy 348 0.45 0.00 0.49 0.00 1.00
Panel C: Characteristics of directors and CEOs
CEO Age 348 53.95 54.00 7.54 40.00 75.00
CEO T enure 348 6.31 5.00 4.78 0.00 17.00
CEO COB 348 0.68 1.00 0.47 0.00 1.00
CEO Change 348 0.11 0.00 0.32 0.00 1.00
CEO CS 348 1.18 0.06 3.18 0.00 18.01
V alCEO Op 348 1.70 0.00 6.72 0.00 43.81
V alAll Op 344 1.38 0.58 2.17 0.00 9.26
Cash F ee Outsiders 348 0.63 0.72 0.36 0.00 1.10
Annual F ixed F ee 348 11.69 8.00 11.45 0.00 50.00
CEO Bachelor 348 0.15 0.00 0.35 0.00 1.00
CEO High Edu 348 0.07 0.00 0.25 0.00 1.00
aSpecifically, the minimum value for positive hedge ratios is 0.008.
Table A.2 (continued)
Variables N Mean Median Std. Dev. Min Max
Panel D: Characteristics and financial background of directors on the audit committee
M in size 348 0.91 1.00 0.29 0.00 1.00
T ot indep 348 0.53 1.00 0.50 0.00 1.00
One Acc 345 0.42 0.00 0.49 0.00 1.00
One F in know 348 0.89 1.00 0.30 0.00 1.00
One Act Edu Acc 348 0.32 0.00 0.47 0.00 1.00
One Act Edu N otAcc 348 0.24 0.00 0.43 0.00 1.00
One Act N otEdu N otAcc 348 0.42 0.00 0.49 0.00 1.00
One N otAct Edu Acc 348 0.22 0.00 0.41 0.00 1.00
One N otAct Edu N otAcc 348 0.39 0.00 0.49 0.00 1.00
%Act Edu Acc 345 0.12 0.00 0.19 0.00 0.67
%Act Edu N otAcc 345 0.11 0.00 0.23 0.00 1.00
%Act N otEdu N otAcc 345 0.14 0.00 0.18 0.00 0.50
%N otAct Edu Acc 345 0.07 0.00 0.14 0.00 0.50
%N otAct Edu N otAcc 345 0.14 0.00 0.21 0.00 1.00
%Bachelor 325 0.62 0.67 0.28 0.00 1.00
%High Edu 345 0.16 0.00 0.24 0.00 1.00
%Acc 348 0.19 0.00 0.25 0.00 1.00
All F in know 348 0.29 0.00 0.45 0.00 1.00
N um High Edu 348 0.50 0.00 0.73 0.00 3.00
Panel E: Characteristics and financial background of Directors on the board
M aj Indep Bor 348 0.75 1.00 0.44 0.00 1.00
%Indep 348 0.61 0.60 0.19 0.14 1.00
%Act 348 0.26 0.24 0.15 0.00 0.71
%Act Edu Acc 345 0.12 0.00 0.19 0.00 0.67
%Act Edu N otAcc 345 0.11 0.00 0.23 0.00 1.00
%Act N otEdu N otAcc 345 0.07 0.00 0.14 0.00 0.50
%N otAct Edu Acc 345 0.14 0.00 0.21 0.00 1.00
%N otAct Edu N otAcc 348 0.11 0.09 0.12 0.00 0.44
%Bachelor 325 0.61 0.60 0.17 0.29 1.00
%High Edu 348 0.13 0.08 0.16 0.00 0.71
One Acc 348 0.71 1.00 0.45 0.00 1.00
%Acc 348 0.13 0.13 0.11 0.00 0.43
N um High Edu 348 1.19 1.00 1.39 0.00 6.00
Figure 1: Sample constitution procedure.
Figure 2: Observed hedge ratio.
Figure 3: Categories of the financial literacy of directors.