Family vs. Non-Family Firms: Hedging Foreign Exchange Risk with Derivatives

Effective risk management, particularly through the use of derivatives, is crucial for mitigating the heightened foreign exchange (FX) risk faced by firms in export-driven economies such as Sweden. Derivatives offer a cost-efficient tool to reduce overall risk exposure, and in economies characterized by high ownership concentration, the role of family ownership in shaping hedging decisions warrants close examination. While previous research offers mixed findings regarding the influence of family ownership on hedging strategies, limited attention has been given to whether family versus non-family firms, especially within the Swedish environment, differ in their use of FX derivatives. This study investigates whether family ownership has a significant influence on firms’ engagement in currency derivative hedging against FX risk. The empirical findings suggest that family ownership does not influence hedging behavior. Instead, hedging via FX derivatives appears to be more closely related to firm-specific characteristics.