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The role of managerial characteristics in FX risk management: Who increases risk?

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  • Andreas Hecht

    (University of Hohenheim)

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.

Suggested Citation

  • Andreas Hecht, 2021. "The role of managerial characteristics in FX risk management: Who increases risk?," Review of Managerial Science, Springer, vol. 15(8), pages 2377-2406, November.
    • Handle: RePEc:spr:rvmgts:v:15:y:2021:i:8:d:10.1007_s11846-020-00432-x
    DOI: 10.1007/s11846-020-00432-x
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    More about this item

    Keywords

    Foreign exchange; Derivatives; Risk management; Speculation; Managerial characteristics;
    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
    • G39 - Financial Economics - - Corporate Finance and Governance - - - Other

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