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Which Investors Fear Expropriation? Evidence from Investors' Portfolio Choices
Author(s) -
GIANNETTI MARIASSUNTA,
SIMONOV ANDREI
Publication year - 2006
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.2006.00879.x
Subject(s) - corporate governance , expropriation , business , institutional investor , portfolio , quality (philosophy) , investor protection , finance , accounting , monetary economics , economics , market economy , philosophy , epistemology
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) who generally enjoy only security benefits are reluctant to invest in companies with weak corporate governance. In contrast, individuals 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.