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On Optimal Production and the Market to Book Ratio Given Limited Shareholder Diversification
Thomas E. Conine, Jr., Oscar W. Jensen and Maurry Tamarkin
Vol. 35, No. 8 (Aug., 1989), pp. 1004-1013
Published by: INFORMS
Stable URL: http://www.jstor.org/stable/2632152
Page Count: 10
You can always find the topics here!Topics: Shareholders, Portfolio diversification, Investors, Capital asset pricing models, Capital costs, Investment risk, Finance, Price elasticity of demand, Capital investments, Systematic risk
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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.
Management Science © 1989 INFORMS