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Do foreign currency risk management strategies increase value in family business?

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  • Mefteh-Wali, Salma
  • Hussain, Nazim

Abstract

This paper examines the existence and the magnitude of conflict between family owners and minority shareholders within family firms by assessing the impact of foreign currency (FC hereafter) risk management strategies on firm value. From a secondary agency perspective, we theorize and find evidence that FC risk management policies in family firms are suboptimal and do not create value. Our findings support that family firms develop secondary agency problems reflected in suboptimal hedging policies. These agency problems are mostly present in firms where family control is combined with family management. Our results are robust to a battery of tests.

Suggested Citation

  • Mefteh-Wali, Salma & Hussain, Nazim, 2024. "Do foreign currency risk management strategies increase value in family business?," International Review of Financial Analysis, Elsevier, vol. 93(C).
    • Handle: RePEc:eee:finana:v:93:y:2024:i:c:s1057521924000838
    DOI: 10.1016/j.irfa.2024.103151
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    More about this item

    Keywords

    Family firms; Foreign currency exposure; Financial hedging; Firm valuation; Derivatives; Risk management; Ownership; Governance;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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