Financial decisions of the financially literate

This paper investigates the portfolio performance of the company-based savings of a cross section of approximately 30,000 employees of a listed French bank. We have detailed information about each job position in the bank, which enables us to study the employees? financial literacy, specific knowledge of the plans offered, and private information. These better-informed bank employees supposedly adopt behavior that is the closest to that of an informed rational investor. We explore the employees? portfolio performance in the savings plans and find that financial expertise and knowledge of the plans are related to participation in the plans offered by the company. Financial expertise is related to better employee stock purchase plans (ESPP) individual portfolio performance but not to the company-based savings plan (CSP) and the overall performance of the company?s plans. For both offered plans, participation is more likely among the job categories (including finance experts), female employees, more educated employees and less financially constrained employees. We find evidence of the mental accounting of company stock highlighted by Benartzi and Thaler (2001).