Too Much at Stake? Entrepreneurial Wealth Concentration and Firm Performance

Fabiano Schivardi, Luigi Guiso, Steffen Andersen and Damiano Argan

No 22159, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Using detailed Danish registry data, we study how entrepreneurial wealth concentration—the share of an entrepreneur's wealth invested in their firm—affects firm performance. We exploit the marital divorce of a minority shareholder as an exogenous shock to the majority shareholder's concentration: divorce forces the minority shareholder to liquidate their stake, the majority shareholder is the most likely buyer, and concentration rises independently of firm fundamentals. In response, the controlling shareholder adopts more prudent strategies: both the mean and variance of firm performance—measured by ROE, sales and employment—decline markedly. A five-percentage-point increase in concentration lowers ROE by 11 percentage points and sales and employment levels by 8\%. Because high concentration reflects entrepreneurs' limited ability to diversify their wealth, our findings indicate that welfare gains from reducing frictions in equity markets are sizeable.

Keywords: entrepreneurship; Diversification; Idiosyncratic risk; Firm performance (search for similar items in EconPapers)
JEL-codes: D23 G32 L25 O16 (search for similar items in EconPapers)
Date: 2026-11
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