Non-diversified Shareholders and Rationality, Another Puzzle?
Créé le
05.06.2014-
Mis à jour le
17.06.2014Family control as a form of governance has been widely studied but very little has been said about motivation of historical shareholders who bear the firm idiosyncratic risks, on top of sector risks and market risks, for the same return as for well-diversified shareholders. This goes against the generally accept capital asset pricing model. Hence the question: are non-diversified shareholders rational?
Classical theories have been tarnished by the succession of financial crisis the world has witnessed from the Black Tuesday to the subprime crisis. Nothing wrong with the logic behind these theories but the growing number of empirical evidences showing investors not really rational messes with one of the central hypothesis of modern finance. It helped give credit to behavioral finance theories over time, but if behavioral finance provides a new framework to understand recurring market anomalies via individuals’ psychology, it has not explained why entrepreneurs or family businesses owners ...
