Cross-ownership and portfolio choice

Galeotti, A and Ghiglino, C (2021) Cross-ownership and portfolio choice. Journal of Economic Theory, 192. p. 105194. ISSN 0022-0531

Abstract

Cross-ownership smooths firms' idiosyncratic shocks but affects their portfolio choice and, therefore, their risk-taking position. The classical intuition on the role of pooling risk in raising welfare is valid when ownership is evenly dispersed. However, when the ownership of some firms is concentrated in the hands of a few others, deeper integration leads to excessive risk-taking and volatility and, consequently, it results in lower aggregate welfare.

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Item Type: Article
Subject Areas: Economics
Additional Information:

© 2021 Elsevier. This manuscript version is made available under the CC-BY-NC-NC licence https://creativecommons.org/licenses/by-nc-nd/4/0

Funder Name: European Research Council, European Research Council
Date Deposited: 22 Jan 2021 14:31
Date of first compliant deposit: 04 Feb 2021
Subjects: I > Investment appraisal
F > Financial risk
C > Co-ownership
Last Modified: 27 Aug 2021 00:21
URI: https://lbsresearch.london.edu/id/eprint/1629
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