Stakeholder versus Shareholder Satisfaction in Corporate Risk Management

Inherent in corporate governance is the conflict between satisfying stakeholders in general versus satisfying shareholders in particular. This empirical study of Danish non-financial companies finds that companies which state that their aim is to satisfy stakeholders in general ("stakeholder satisfaction companies") pursue a more extensive hedging strategy of exposures to changes in exchange rates than companies which state that their aim is to satisfy shareholders in particular ("shareholder satisfaction companies"). The extensive hedging strategy of stakeholder satisfaction companies cannot be explained by company characteristics normally identified in the literature as being decisive for hedging behaviour such as firm size, leverage, and export ratio. Rather, the study finds a unique relationship between the managerial focus on stakeholders and a conservative risk management strategy. The results are important to companies in other countries with open economies.