Corporate Governance and the Home Bias

Lee Pinkowitz, René M. Stulz and Rohan Williamson

No 8680, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: In most countries, many of the largest corporations are controlled by large shareholders. We show that, under reasonable assumptions, this stylized fact implies that portfolio holdings of U.S. investors should exhibit a home bias in equilibrium. We construct an estimate of the world portfolio of shares available to investors who are not controlling shareholders. This available world portfolio differs sharply from the world market portfolio. In regressions explaining the portfolio weights of U.S. investors, the world portfolio of available shares has a positive significant coefficient but the world market portfolio has no additional explanatory power. This result holds when we control for country characteristics.

JEL-codes: G11 G12 (search for similar items in EconPapers)
Date: 2001-12
Note: CF IFM ITI
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Working Paper: Corporate Governance and the Home Bias (2002)
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