Corporate Governance and the Home Bias
Lee Pinkowitz, Rene M. Stulz, Rohan Williamson
NBER Working Paper No. 8680
In most countries, many of the largest corporations are controlled by large shareholders. We show that, under reasonable assumptions, this stylized fact implies that portfolio holdings of U.S. investors should exhibit a home bias in equilibrium. We construct an estimate of the world portfolio of shares available to investors who are not controlling shareholders. This available world portfolio differs sharply from the world market portfolio. In regressions explaining the portfolio weights of U.S. investors, the world portfolio of available shares has a positive significant coefficient but the world market portfolio has no additional explanatory power. This result holds when we control for country characteristics.
Document Object Identifier (DOI): 10.3386/w8680
Published: Pinkowitz, Lee, Rene M. Stulz, Magnus Dahlquist, and Rohan Williamson. "Corporate Governance and the Home Bias." Journal of Financial and Quantitative Analysis 38, 1 (2003): 87-110. citation courtesy of
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