On Optimal Production and the Market to Book Ratio Given Limited Shareholder Diversification

On Optimal Production and the Market to Book Ratio Given Limited Shareholder Diversification

Our purpose is to examine a firm's optimal output decision and valuation when its shareholders hold a limited number of risky assets. The primary theoretical result indicates that the market-to-book ratio is a function of the degree of shareholder diversification. Our theory suggests a negative...

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Veröffentlicht in:Management science 1989-08, Vol.35 (8), p.1004-1013
Hauptverfasser: Conine, Thomas E., Jr, Jensen, Oscar W, Tamarkin, Maurry
Format: Artikel
Sprache:eng
Schlagworte:
antidiversification
Applied sciences
Capital asset pricing models
Capital costs
Capital investments
Decision theory. Utility theory
Diversification
Exact sciences and technology
Investment risk
Investors
Market
market-to-book ratio
Mayshar CAPM
Operational research and scientific management
Operational research. Management science
Portfolio diversification
Price elasticity of demand
Production
Shareholders
Stockholders
Systematic risk
Transaction costs
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Beschreibung
Zusammenfassung:Our purpose is to examine a firm's optimal output decision and valuation when its shareholders hold a limited number of risky assets. The primary theoretical result indicates that the market-to-book ratio is a function of the degree of shareholder diversification. Our theory suggests a negative relationship between a firm's market-to-book ratio and shareholder diversification.
ISSN:0025-1909
1526-5501
DOI:10.1287/mnsc.35.8.1004