期刊论文

Xia, Xin

英文

Economics Letters

0165-1765

2017

153

65-71

10.1016/j.econlet.2017.02.011

Chunhui Wen acknowledges the support from the National Social Science Foundation of China (#13CJY008), Postdoctoral Foundation of China (#2016M591642), Social Science Foundation of Hunan Province (#15YBA206) and 1515 Talents Project of Hunan Agricultural University. Xin Xia acknowledges the support from the National Natural Science Foundation of China (#71402087 and #71472117). Jinqiang Yang acknowledges the support from the National Natural Science Foundation of China (#71202007, #71522008, #71532009 and #71573033), Innovation Program of Shanghai Municipal Education Commission (#13ZS050), Chen Guang Project of Shanghai Municipal Education Commission and Shanghai Education Development Foundation (#12CG44), Innovative Research Team of Shanghai University of Finance and Economics (#2016110241), and Fok Ying-Tong Education Foundation of China (#151086).

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This paper develops an incomplete-markets model of investment timing by a firm's controlling shareholder, who is exposed to idiosyncratic risk and pursues private benefits at the expense of outside shareholders. We show that the timing of investment selected by the controlling shareholder reflects a tradeoff between his incentives to pursue private benefits and the costs of nondiversification. The firm may overinvest or underinvest depending on the magnitude of the agency conflicts. Moreover, our theoretical model predicts that increasing the c...