Investor Behavior and the Benefits of Direct Stock Ownership
54 Pages Posted: 20 Dec 2017 Last revised: 29 Jun 2018
Date Written: December 19, 2017
Using an experiment to rule out reverse causality, we examine whether a small investment in a company’s stock leads investors to purchase more of the company’s products and adopt other views and preferences that benefit the company. We pre-register our research methods, hypotheses, and supplemental analyses via the Journal of Accounting Research’s registration based editorial process. We find little evidence consistent with these hypotheses for the average investor in our sample using our planned univariate hypothesis tests, and planned Bayesian parameter estimation shows substantial downward belief revision for more optimistic ex ante expectations of the treatment effects. In planned supplemental analyses, however, we do find that the effects of ownership on product purchase behavior and on regulatory preferences are intuitively stronger for certain subgroups of investors — namely, for investors who are most likely to purchase the types of products offered by the company and for investors who are most likely to vote on political matters. The results contribute to our understanding of the benefits of direct stock ownership and are informative to public company managers and directors.
Keywords: Direct Stock Ownership, Investor Behavior, Bayesian Analysis, Registered Report
JEL Classification: M41, G32, G40
Suggested Citation: Suggested Citation