Lack of Diversification Among Employee Stock Owners: An Empirical Evaluation of Behavioral Explanations

Pendleton, A.; Robinson, A.

doi:10.1002/hrm.21892

Lack of Diversification Among Employee Stock Owners: An Empirical Evaluation of Behavioral Explanations

Pendleton, A.; Robinson, A.

Authors

A. Pendleton

A. Robinson

Abstract

The article considers the reasons for employees holding large proportions of their financial savings and investments in company stock, drawing on explanations proposed in the behavioral finance literature. Utilizing data from a survey of employees participating in the United Kingdom Save as You Earn stock options and savings scheme, it is found that substantial proportions of stock owners hold sizeable concentrations of employer stock. Several explanations for this risky behavior are tested, with familiarity, reciprocity, and inertia found to be associated with portfolio concentration. Organizational commitment and “naïve extrapolation” from recent stock prices are not. The implications for theory and practice are considered.

Citation

Pendleton, A., & Robinson, A. (2018). Lack of Diversification Among Employee Stock Owners: An Empirical Evaluation of Behavioral Explanations. Human Resource Management, 57(7), 1175-1187. https://doi.org/10.1002/hrm.21892

Journal Article Type	Article
Acceptance Date	Nov 7, 2017
Online Publication Date	Jan 9, 2018
Publication Date	Sep 1, 2018
Deposit Date	Nov 9, 2017
Publicly Available Date	Jan 9, 2020
Journal	Human Resource Management
Print ISSN	0090-4848
Electronic ISSN	1099-050X
Publisher	Wiley
Peer Reviewed	Peer Reviewed
Volume	57
Issue	7
Pages	1175-1187
DOI	https://doi.org/10.1002/hrm.21892
Public URL	https://durham-repository.worktribe.com/output/1343967

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Copyright Statement
This is the accepted version of the following article: Pendleton, A. & Robinson, A. (2018). Lack of Diversification Among Employee Stock Owners: An Empirical Evaluation of Behavioral Explanations. Human Resource Management 57(5): 1175-1187, which has been published in final form at https://doi.org/10.1002/hrm.21892. This article may be used for non-commercial purposes in accordance With Wiley Terms and Conditions for self-archiving.