Use of derivatives by family firms listed on Warsaw Stock Exchange

Abstract

On the basis of an unbalanced panel of 105 public companies listed on Warsaw Stock Exchange in the period 2006-2010 we document that, on average, family firms are less likely to use hedging instruments and they use them less extensively than non-family firms. Moreover, for family firms we observe significantly stronger relation between risk exposure measures such as foreign sales percentage or financial leverage and the scale of hedging instruments used. Our findings do not confirm the conventional wisdom of above-average risk-aversion of family firms. The differences between family and non-family firms in the use of hedging instruments should be rather explained on the basis of agency theory and agency costs.