Which Investors Fear Expropriation? Evidence from Investors' Portfolio Choices

Which Investors Fear Expropriation? Evidence from Investors' Portfolio Choices

Mariassunta Giannetti, Andrei Simonov

Series number :

Serial Number: 

Date posted :

June 01 2004

Last revised :

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  • Investor behavior • 
  • Shareholder base • 
  • security benefits • 
  • portfolio selection • 
  • Corporate governance

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 who generally enjoy only security benefits (domestic and foreign, institutional and small individual investors) are reluctant to invest in companies with weak corporate governance. In contrast, individuals who are well connected with the local financial community because they are board members or hold large blocks of at least some listed companies behave differently. They seem not to care about the expected extraction of private benefits and even prefer to invest in companies where there is more scope for it. These findings shed new light on the determinants of investor behavior and portfolio choice, and suggest that it is important to distinguish between investors who enjoy private benefits or access private information and investors who enjoy only security benefits.

Published in

Published in: 
Publication Title: 
The Journal of finance
Volume 61, Issue 3, Pages 1507-1547


Real name:
Andrei Simonov