*3.1. Sample Selection*

The information of executive pension is collected from the Standard and Poors' EXEUCOMP database. In 2006, the SEC issued a new rule on the proxy disclosure of executive compensation, requiring a detailed disclosure of pension and deferred compensation that are granted as a part of executive compensation. Accordingly, EXEUCOMP extends the coverage on this disclosure, which allows us to obtain top managers' pension compensation from 2006 and afterwards. Therefore, our initial sample includes all US firms whose CEOs are listed in EXEUCOMP from 2006 through 2015. Financial firms (with a SIC code of 6000 through 6999) and utility firms (with a SIC code of 4900 through 4999) are excluded as these firms are heavily regulated. We also eliminate observations with missing or negative total assets or negative common equity. Such criteria generate the initial sample of 1936 firms with 16,936 firm-years.

Following the literature (Doukas and Pantzalis 2003; Graham and Rogers 2002; Campello et al. 2011), we identify the multinational firms with ex ante exposure to currency risk if they report foreign assets, foreign sales, or foreign income in the COMPUSTAT Geographic Segment databases, or they disclose positive amounts of foreign currency adjustment, exchange rate effect, foreign income taxes, or deferred foreign taxes in the annual COMPUSTAT database. We identify an MNC sample of 49,557 firm-year observation associated with 8642 firms that have foreign operation activities from 2006 to 2015.1 Given the fact of the different coverage between COMPUSTAT and EXECUCOMP (EXECUCOMP mainly covers the large-cap firms), after merging two databases we obtain the final sample of 11,718 firm-year observations associated with 1625 firms that have foreign operation activities from 2006 to 2015.

We retrieved the information of firm hedging activities through conducing a textual search in 10-K filings compiled in the Securities and Exchange Commission (SEC) EDGAR database. Specifically, we performed the search based on a set of keywords including: *currency derivative, currency swaps, currency forwards, currency futures, currency options, currency contract, currency forward contract, exchange forward, exchange future, exchange swap, exchange option, exchange contract, or forward exchange contract*. For each keyword found, we review the context in which the keyword appears in the report to confirm the use of derivatives for hedging. We match the 10-K filing information with the financial data from COMPUSTAT by the identifier of Central Index Key (CIK).
