Journal
REVIEW OF FINANCIAL STUDIES
Volume 24, Issue 11, Pages 3601-3641Publisher
OXFORD UNIV PRESS INC
DOI: 10.1093/rfs/hhr065
Keywords
G11; G15; G31
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Using new data for the universe of firms covered in Amadeus, we reconstruct the portfolios of shareholders who hold equity stakes in private- and publicly traded European firms. We find great heterogeneity in the degree of portfolio diversification across large shareholders. Exploiting this heterogeneity, we document that firms controlled by diversified large shareholders undertake riskier investments than firms controlled by nondiversified large shareholders. The impact of large shareholder diversification on corporate risk-taking is both economically and statistically significant. Our results have important implications at the policy level because they identify one channel through which policy changes can improve economic welfare.
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