Discussion paper

DP16316 Ethnic Investing and the Value of Firms

We study ethnic investing, using transaction data from Kenya’s stock exchange and CEO/board turnover. We show that a given investor invests more in a given firm when the firm is run by coethnics and earns lower risk-adjusted returns on such investments. We then model and empirically test for the aggregate impact of (i) the implied taste- or psychology-driven investor discrimination and (ii) counteracting demand- and supply-side forces. Our estimates imply that listed Kenyan firms could collectively be worth 37 percent more—with minority-run firms benefitting the most—if the neutral proportion of active investors increased from 4.2 to 50 percent.


Hjort, J (2021), ‘DP16316 Ethnic Investing and the Value of Firms‘, CEPR Discussion Paper No. 16316. CEPR Press, Paris & London. https://cepr.org/publications/dp16316