Owners' Portfolio Diversification and Firm Investment: Theory and Evidence from Private and Public Firms

Evgeny Lyandres, Maria‐Teresa Marchica, Roni Michaely and Roberto Mura
Additional contact information
Evgeny Lyandres: Boston University
Maria‐Teresa Marchica: University of Manchester - Alliance Manchester Business School

No 19-12, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: 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 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 impact firms' resource allocation.

Keywords: diversification; strategies; private firms (search for similar items in EconPapers)
JEL-codes: G11 G15 G31 G32 (search for similar items in EconPapers)
Pages: 68 pages
Date: 2019-03, Revised 2019-03
New Economics Papers: this item is included in nep-cfn and nep-upt
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2234195 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp1912

Access Statistics for this paper

More papers in Swiss Finance Institute Research Paper Series from Swiss Finance Institute Contact information at EDIRC.
Bibliographic data for series maintained by Ridima Mittal ().