Family Ownership and the Cost of Under Diversification
2008 (English)In: Applied Financial EconomicsArticle in journal (Refereed) Published
We argue that the cost to a family of holding a large block of shares in a company, or under diversifying, is reflected in the diversification benefits that the family forfeits. These costs can be substantial. For example, given a constant relative risk aversion parameter of two the median cost to our sample of families controlling large Swedish firms is 13% of the market value of firm’s shares. We find that this cost is reduced by pyramid structures but not by the use of dual class shares.
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IdentifiersURN: urn:nbn:se:uu:diva-13484OAI: oai:DiVA.org:uu-13484DiVA: diva2:41254