Lea Best
- 7 October 2026
- WORKING PAPER SERIES - No. 3296Details
- Abstract
- This paper develops novel firm-level measures of shareholder geographical concentration and examines how elevated home bias in equity holdings affects investment resilience in the euro area. We combine security-level holdings data from the ECB’s Securities Holdings Statistics (SHS-S) with firm-level financial-statement data from Compustat, and document that equity ownership remains strongly concentrated domestically, with limited cross-border diversification within the monetary union. Using a difference-in-differences design around the COVID-19 shock, combined with a propensity score matching approach, we then analyse whether equity home bias shapes firms’ responses to macroeconomic disruptions. Against an average 16% decline in exports among the firms in the sectors most affected by the pandemic, those with more concentrated, home-biased shareholder bases reduced investment by 20% more than their more diversified peers after the shock. The effect operates mainly through weaker equity resilience, with equity declining by 13%, while sales and bank financing remain comparable. Our findings highlight the benefits of deeper cross-border equity integration for corporate resilience.
- JEL Code
- F36 : International Economics→International Finance→Financial Aspects of Economic Integration
G32 : Financial Economics→Corporate Finance and Governance→Financing Policy, Financial Risk and Risk Management, Capital and Ownership Structure, Value of Firms, Goodwill
G15 : Financial Economics→General Financial Markets→International Financial Markets
D22 : Microeconomics→Production and Organizations→Firm Behavior: Empirical Analysis
E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy