The Role of Managerial Characteristics in FX Risk Management – Who Increases Risk?

Hecht, A. The role of managerial characteristics in FX risk management: Who increases risk?. Rev Manag Sci (2021). https://doi.org/10.1007/s11846-020-00432-x

Posted: 22 Oct 2020 Last revised: 6 Jan 2021

Date Written: September 7, 2020

Abstract

We examine the impact of managerial characteristics on the choice of risk-decreasing and risk-increasing/-constant strategies. Using unique data on firm-, year-, and currency-specific FX exposure before and after hedging with corresponding hedging instruments, we are able to measure how much a CEO has been involved in risk-increasing/-constant strategies over several years. We provide evidence that firms where the CEO has an MBA degree and is older are more likely to engage in risk-increasing/-constant strategies. In addition, we find that a CEO’s affiliation to the owner’s family seems to reduce the amount of derivatives a firms uses, while hedging short tends to increase derivative volumes.

Keywords: Foreign Exchange, Derivatives, Risk Management, Speculation, Managerial Characteristics

JEL Classification: G30, G32, G39

Suggested Citation

Hecht, Andreas, The Role of Managerial Characteristics in FX Risk Management – Who Increases Risk? (September 7, 2020). Hecht, A. The role of managerial characteristics in FX risk management: Who increases risk?. Rev Manag Sci (2021). https://doi.org/10.1007/s11846-020-00432-x, Available at SSRN: https://ssrn.com/abstract=3688281

Andreas Hecht (Contact Author)

University of Hohenheim ( email )

Fruwirthstr. 48
Stuttgart, 70599
Germany

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