Conglomerate investment, skewness, and the CEO long shot bias

C.A.R. Schneider, Oliver Spalt

Research output: Contribution to journalArticleScientificpeer-review

38 Citations (Scopus)
581 Downloads (Pure)


Do behavioral biases of executives matter for corporate investment decisions? Using segment-level capital allocation in multi-segment firms ("conglomerates") as a laboratory, we show that capital expenditure is increasing in the expected skewness of segment returns. Conglomerates invest more in high-skewness segments than matched standalone firms, and trade at a discount, which indicates overinvestment that is detrimental to shareholder wealth. Using geographical variation in gambling norms, we find that the skewness-investment relation is particularly pronounced when CEOs are likely to find long shots attractive. Our findings suggest that CEOs allocate capital with a long shot bias.
Original languageEnglish
Pages (from-to)635-672
JournalJournal of Finance
Issue number2
Publication statusPublished - 2016


  • Behavioral Corporate Finance
  • Skewness
  • Investment


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