The Cost of Owning Employer Stocks: Lessons From Taiwan
AbstractUsing data on all employees at listed companies in Taiwan, we find that the bias toward employer stocks is generic to individual investor decision-making, but not limited to retirement plans. 71 percent of sample employees invest in employer stocks and the employer stocks make up on average 47 percent of employee equity portfolios. The under-diversification resulting from the bias toward employer stocks is highly costly. Holding current portfolio risk constant, employees forego 4.89 percent per annum in raw returns by investing in employer stocks, which represents 39.74 percent of their average 1998 salary income. Our findings have important implications for social security reform and retirement account management.
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Bibliographic InfoPaper provided by Center for Retirement Research in its series Working Papers, Center for Retirement Research at Boston College with number wp2007-24.
Date of creation: Oct 2007
Date of revision: Dec 2007
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Other versions of this item:
- Lee, Yi-Tsung & Liu, Yu-Jane & Zhu, Ning, 2008. "The Costs of Owning Employer Stocks: Lessons from Taiwan," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 43(03), pages 717-740, September.
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- Ginglinger, Edith & Megginson, William & Waxin, Timothée, 2011.
"Employee ownership, board representation, and corporate financial policies,"
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- Edith Ginglinger & William Megginson & Timothee Waxin, 2011. "Employee Ownership, Board Representation, and Corporate Financial Policies," Post-Print halshs-00626310, HAL.
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