A risky affair: Dual class and FX hedging

We highlight the risk management activities of dual class firms by focusing on their use of foreign exchange (FX) derivatives. As opposed to single class firms, dual class firms engage in lower levels of FX hedging activities which may be driven by their long-term orientation and insulation from short-term market pressures. Furthermore, we document that these firms have a stronger reluctance to using futures contracts for FX hedging due to their preference for opacity and hesitancy to divert resources away from their long-term goals. Overall, we underscore the influence of a firm's share structure on its FX hedging decisions.

Automated summary

This study highlights the risk management activities of dual class firms, specifically focusing on their use of foreign exchange derivatives. Compared to single class firms, dual class firms engage in lower levels of FX hedging activities due to their long-term orientation and insulation from short-term market pressures. Additionally, the research finds that these firms are more reluctant to use futures contracts for FX hedging, preferring opacity and hesitating to divert resources from their long-term goals.