The Cost of Owning Employer Stocks: Lessons From Taiwan

Yi-Tsung Lee, Yu-Jane Liu () and Ning Zhu

Working Papers, Center for Retirement Research at Boston College from Center for Retirement Research

Abstract: Using data on all employees at listed companies in Taiwan, we find that the bias toward employer stocks is generic to individual investor decision-making, but not limited to retirement plans. 71 percent of sample employees invest in employer stocks and the employer stocks make up on average 47 percent of employee equity portfolios. The under-diversification resulting from the bias toward employer stocks is highly costly. Holding current portfolio risk constant, employees forego 4.89 percent per annum in raw returns by investing in employer stocks, which represents 39.74 percent of their average 1998 salary income. Our findings have important implications for social security reform and retirement account management.

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Date: 2007-10, Revised 2007-12
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http://crr.bc.edu/working-papers/the-cost-of-ownin ... lessons-from-taiwan/

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Journal Article: The Costs of Owning Employer Stocks: Lessons from Taiwan (2008)
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