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Managers’ research education, the use of FX derivatives and corporate speculation

Author

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  • Oliver Entrop

    (University of Passau)

  • Matthias F. Merkel

    (University of Passau)

Abstract

In contrast to the U.S., many executive managers of firms in German-speaking countries have a PhD. In this paper we analyze if a research-oriented background in the form of a PhD is linked to the corporate decision-making of CFOs in the use of foreign exchange (FX) derivatives in Germany. After controlling for fundamental firm characteristics, compensation schemes and personal characteristics of managers, we find some evidence that CFOs with a PhD in a business-related area tend to use FX derivatives less, while CFOs with a general business education do so more. Analyzing their behavior with regard to speculation, we find strong evidence that CFOs with a PhD speculate less on the FX market compared to CFOs with another (business) education. A possible reason may be that a research-oriented education is more associated with critical awareness and long-term orientation in corporate decision-making that persuades managers to avoid overconfident behavior.

Suggested Citation

  • Oliver Entrop & Matthias F. Merkel, 2020. "Managers’ research education, the use of FX derivatives and corporate speculation," Review of Managerial Science, Springer, vol. 14(4), pages 869-901, August.
    • Handle: RePEc:spr:rvmgts:v:14:y:2020:i:4:d:10.1007_s11846-018-0314-z
    DOI: 10.1007/s11846-018-0314-z
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    1. Fuchs, Fabian U., 2022. "Macroeconomic determinants of foreign exchange rate exposure," The Quarterly Review of Economics and Finance, Elsevier, vol. 85(C), pages 77-102.

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    More about this item

    Keywords

    FX derivatives; Risk management; Speculation; Overconfidence; PhD; Doctorate;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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