Family ownership and the cost of under-diversification

Richard Heaney, M. Holmen

Research output: Contribution to journalArticlepeer-review

13 Citations (Scopus)
224 Downloads (Pure)


We argue that the cost to a family of holding a large block of shares in a company, or under-diversifying, is reflected in the diversification benefits that the family forfeits. These costs can be substantial. For example, given a constant relative risk aversion parameter of 2, the median cost to our sample of families controlling large Swedish firms is 13% of the market value of firm’s shares. We find that this cost is reduced by pyramid structures but not by the use of dual class shares.
Original languageEnglish
Pages (from-to)1721-1737
JournalApplied Financial Economics
Issue number21
Early online date22 Nov 2008
Publication statusPublished - 2008


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