TY - JOUR
T1 - Owners' Portfolio Diversification and Firm Investment
AU - Lyandres, Evgeny
AU - Marchica, Maria Teresa
AU - Michaely, Roni
AU - Mura, Roberto
N1 - Publisher Copyright:
© 2019 The Author(s) 2019. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved.
PY - 2019/12/1
Y1 - 2019/12/1
N2 - Portfolio diversification of firms' controlling owners influences their firms' capital investment. Empirically, the effect of owners' portfolio diversification on their firms' investment levels is positive for publicly traded firms and tends to be negative for privately held ones. These findings are consistent with predictions of a model in which a risk-averse investor simultaneously chooses her portfolio structure, and both the level and riskiness of capital investment of the firm she controls, and in which the firm can be potentially constrained in its capital investment choices. Overall, our results indicate that owners' portfolio underdiversification and firms' financial constraints can affect firms' resource allocation. Received May 3, 2017; editorial decision March 8, 2019 by Editor Francesca Cornelli. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.
AB - Portfolio diversification of firms' controlling owners influences their firms' capital investment. Empirically, the effect of owners' portfolio diversification on their firms' investment levels is positive for publicly traded firms and tends to be negative for privately held ones. These findings are consistent with predictions of a model in which a risk-averse investor simultaneously chooses her portfolio structure, and both the level and riskiness of capital investment of the firm she controls, and in which the firm can be potentially constrained in its capital investment choices. Overall, our results indicate that owners' portfolio underdiversification and firms' financial constraints can affect firms' resource allocation. Received May 3, 2017; editorial decision March 8, 2019 by Editor Francesca Cornelli. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.
UR - http://www.scopus.com/inward/record.url?scp=85076688189&partnerID=8YFLogxK
U2 - 10.1093/rfs/hhz050
DO - 10.1093/rfs/hhz050
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AN - SCOPUS:85076688189
SN - 0893-9454
VL - 32
SP - 4855
EP - 4904
JO - Review of Financial Studies
JF - Review of Financial Studies
IS - 12
ER -