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Cross-ownership and portfolio choice

Galeotti, Andrea and Ghiglino, Christian (2021) 'Cross-ownership and portfolio choice.' Journal of Economic Theory, 192. ISSN 0022-0531

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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.

Item Type: Article
Uncontrolled Keywords: Financial networks, Separation between ownership and control, Bow-tie, Diversification, Concentration, Risk taking
Divisions: Faculty of Social Sciences > Economics, Department of
Depositing User: Elements
Date Deposited: 01 Sep 2021 15:23
Last Modified: 01 Sep 2021 16:15
URI: http://repository.essex.ac.uk/id/eprint/31003

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