Are founding families less willing to bear risk? Evidence from the currency exposure and internationalization strategy of family firms |
| |
| Authors: | Ronald C Anderson Mikael C Bergbrant Delroy M Hunter David M Reeb |
| |
| Institution: | 1. Fox School of Business, Temple University, Philadelphia, Pennsylvania, USA;2. Department of Economics and Finance, Tobin College of Business, St. John's University, Queens, New York, USA;3. Tiedemann School of Business and Finance, Muma College of Business, University of South Florida, Tampa, Florida, USA;4. NUS Business School, National University of Singapore, Singapore |
| |
| Abstract: | Although theory predicts that family firms should be less willing to bear risk than nonfamily firms, prior empirical papers have not found support for this prediction. In this paper, we focus on conditional currency risk because founding families can relatively easily influence their firms’ currency exposure. We find that family firms have relatively lower conditional currency exposure. This result holds for both descendant-led and nonfamily-led family firms. Consistent with purposeful actions of founding families, we find that exposure decreases with control-enhancing mechanisms, such as excess voting rights. The findings also support a wealth-preservation motive, evidenced by a finding that exposure declines with the number of family beneficiaries. Additional analysis suggests that family firms achieve the relatively lower risk by reducing internationalization depth and limiting exposure to riskier currencies. |
| |
| Keywords: | conditional risk currency risk exchange rate exposure family firms internationalization organizational structure |
|
|
