 Who times the foreign exchange market? Corporate speculation and CEO characteristicsAlessandro Beber () and Daniela Fabbri Journal of Corporate Finance, 2012, vol. 18, issue 5, 1065-1087 Abstract: This paper shows that managers' personal beliefs and individual characteristics explain a large share of the substantial time-variation of derivative use beyond firm, industry, and market fundamentals. We construct a panel data set of foreign currency derivative holdings and currency exposures for U.S. non-financial firms. We use a novel approach to build a firm-specific foreign exchange return. We find that managers adjust derivatives notional amounts in response to past foreign exchange returns, as if they were forming views on future currency prices. We then construct an empirical measure of speculative behavior for each firm to investigate the profile of the speculator. Firms where the CEO holds an MBA degree, is younger, and has less previous working experience speculate more. These results are consistent with overconfident managers taking more risk. Keywords: Behavioral corporate finance; CEO characteristics; Speculation; Risk management (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:18:y:2012:i:5:p:1065-1087 DOI: 10.1016/j.jcorpfin.2012.07.004 Access Statistics for this article Journal of Corporate Finance is currently edited by A. Poulsen and J. Netter More articles in Journal of Corporate Finance from Elsevier |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.