Which Investors Fear Expropriation? Evidence from Investors' Portfolio Choices
Stockholm School of Economics; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)
Michigan State University - Eli Broad Graduate School of Management; Centre for Economic Policy Research (CEPR); Gaidar Institute for Economic Policy; SITE
Journal of Finance, Forthcoming
Using a data set that provides unprecedented detail on investors' stockholdings, we analyze whether investors take the quality of corporate governance into account when selecting stocks. We find that all categories of investors (domestic and foreign, institutional and small individual investors), who generally enjoy only security benefits, are reluctant to invest in companies with weak corporate governance. In contrast, individuals who are connected with company insiders are more likely to invest in weak corporate governance companies. These findings suggest that it is important to distinguish between investors who enjoy private benefits or access private information, and investors who enjoy only security benefits.
Keywords: Investor behavior, shareholder base, security benefits, private benefits, portfolio selection, corporate governance
JEL Classification: G11, G32, F21Accepted Paper Series
Date posted: February 21, 2005
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