Finance theory does not provide a comprehensive framework for explaining risk management within the imperfect financial … corporate hedging: equity value maximising strategies and strategies determined by managerial risk aversion. The first category … distress and costs of external finance or to replace home-made hedging by shareholders. The second category considers that …

decision maker's objective. The optimal assignment of decision rights minimizes the resulting inefficiencies. We illustrate … decision right to the agent to implement ' small' projects. Extensions of the model discuss the role of effort incentives …