Investor Behavior and the Benefits of Direct Stock Ownership

54 Pages Posted: 20 Dec 2017 Last revised: 29 Jun 2018

See all articles by Darren Bernard

Darren Bernard

University of Washington - Department of Accounting

Nicole L. Cade

University of Pittsburgh - Accounting Group

Frank D. Hodge

University of Washington - Michael G. Foster School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: December 19, 2017

Abstract

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

Bernard, Darren and Cade, Nicole L. and Hodge, Frank Douglas, Investor Behavior and the Benefits of Direct Stock Ownership (December 19, 2017). Journal of Accounting Research, Vol. 56, No. 2, 2018, Available at SSRN: https://ssrn.com/abstract=3090679 or http://dx.doi.org/10.2139/ssrn.3090679

Darren Bernard

University of Washington - Department of Accounting ( email )

PACCAR Hall
4273 E Stevens Way NE
Seattle, WA 98195-3200
United States

Nicole L. Cade

University of Pittsburgh - Accounting Group ( email )

United States

Frank Douglas Hodge (Contact Author)

University of Washington - Michael G. Foster School of Business ( email )

Paccar Hall 540, Box 353200
Seattle, WA 98195-3200
United States
206-616-8598 (Phone)
206-685-9392 (Fax)

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