Citation

Discussion Paper Details

Please find the details for DP3843 in an easy to copy and paste format below:

Full Details

Title: Which Investors Fear Expropriation? Evidence from Investors' Stock Picking

Author(s): Mariassunta Giannetti and Andrei Simonov

Publication Date: March 2003

Keyword(s): corporate governance, investor behaviour, portfolio selection, ratio of control to cash flow rights and security benefits

Programme Area(s): Financial Economics

Abstract: Using a data-set that provides unprecedented details on individual investors? stockholdings, we analyse whether investors take into account corporate governance when they select stocks. After controlling for the supply effect via free float and other firm characteristics, we find that all categories of investors who generally enjoy only security benefits (domestic and foreign; institutional and small individual investors) are reluctant to invest in companies with bag corporate governance. In contrast, individuals who have strong connections with the local financial community because they are board members or hold large blocks of at least some listed companies behave differently. They do not care about the expected extraction of private benefits or even prefer to invest in firms where there is more room for it. Overall, the effect of corporate governance on portfolio decisions is more pronounced for small and medium size companies. These findings shed new light on the determinants of investor behaviour, and suggest that it is important to distinguish between investors who enjoy private benefits or access private information and investors who enjoy only security benefits in order to understand portfolio choices.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=3843

Bibliographic Reference

Giannetti, M and Simonov, A. 2003. 'Which Investors Fear Expropriation? Evidence from Investors' Stock Picking'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=3843