Corporate hedging, family firms, and CEO identity

78 Pages Posted: 10 May 2022

See all articles by Massimiliano Barbi

Massimiliano Barbi

University of Bologna - Department of Management

Ottorino Morresi

Department of Economics, University of Rome "Roma Tre"

Multiple version iconThere are 2 versions of this paper

Date Written: February 18, 2022

Abstract

We analyze the propensity to hedge of closely-held family firms and the effect of a CEO's identity in explaining hedging decisions. We find that family involvement in CEO positions positively affects the likelihood of hedging. The effect is stronger when the CEO belongs to the founding family, especially for long-tenured and founder CEOs. This evidence supports the higher conservatism of family agents which is most likely aimed at protecting socioemotional wealth and avoiding loss of reputation and control. Higher information asymmetry of family firms and, more weakly, underdiversification positively affect propensity for hedging. Corporate governance attributes proxying agency issues, on the other hand, seem less important. While hedging family firms have lower cash flow variability, they are worth the same as non-hedging family firms.

Keywords: Family management, Family generation, Founder CEO, CEO tenure, Hedging

JEL Classification: G30, G32, G34

Suggested Citation

Barbi, Massimiliano and Morresi, Ottorino, Corporate hedging, family firms, and CEO identity (February 18, 2022). Available at SSRN: https://ssrn.com/abstract=4101036 or http://dx.doi.org/10.2139/ssrn.4101036

Massimiliano Barbi (Contact Author)

University of Bologna - Department of Management ( email )

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Ottorino Morresi

Department of Economics, University of Rome "Roma Tre" ( email )

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Rome, Rome 00145
Italy
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