CEO Characteristics and Hedging Decisions: Examining the Moderating Role of Managerial Ability

Firms with cross-border operations are highly exposed to foreign exchange risk, prompting the need for strategic financial decisions such as hedging. As primary decision-makers, CEOs significantly influence these risk management strategies. This study examines the effect of CEO characteristics—age, education, and work experience—on hedging decisions and evaluates the moderating role of top management team managerial ability in these relationships. Partial Least Squares Structural Equation Modeling (PLS-SEM) is used to test the model. The analysis is based on 91 firm-year observations from energy sector companies listed on the Indonesia Stock Exchange (IDX) during the 2016–2022 period. The results indicate that CEO age and education are positively associated with hedging decisions, while CEO work experience has a negative effect. Notably, managerial ability strengthens the positive influence of CEO age and CEO education on hedging decisions but does not significantly alter the relationship between CEO work experience and hedging.