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Employees’ investment behavior in a company savings plan
Nicolas AUBERT, Université de la Méditerranée - Inseec
Thomas RAPP, University of Maryland
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Introduction Why studying French company based savings plans?
Context Specific features
Understanding employees’ investment behaviors: Background: « Household finance » (Campbell, 2006) Our objectives:
1. Describing employees investment behavior for each asset category offered
“Extreme investment strategies…
2. Investigating how human capital proxies influences investment behaviors
…not specifically due to human capital…
3. Investigating how the number of investment choices offered influences investment behaviors
…but resulting from employer’s menu choice.”
The composition of employees’ portfolio is a consequence of both employees’ and employer’s choices
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Methods Data source
Cross-sectional dataset: 44,649 employees of a CAC 40 bank
Different menus according to the subsidiary (between 2 and 27 funds offered)
MeasuresDependent variables: Independent variables:
PARTICIPATION IN EACH ASSET CATEGORY (0/1)=> Binary outcome requires Probit
AGE (YEARS)
GENDER (MALE=1, FEMALE=0)
AMOUNT INVESTED IN EACH ASSET CATEGORY (EUROS)=> Continuous outcome requires OLS
SALARY (EUROS)
TIME WITH COMPANY (YEARS)
FUNDS SELECTED (NUMBER)ASSET CATEGORIES SELECTED (NUMBER)=> Count outcome requires Poisson
EDUCATION LEVEL (MASTER DEGREE=1, 0 OTHERWISE)
PLACE OF RESIDENCE (PARIS=1, OUTSIDE PARIS=0)
FINANCIAL EXPERTISE (YES=1, NO=0)
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Methods (2) Statistical Analysis
Objective 1: Describing employees investment behavior for each asset category offered Description of employees’ demographic characteristics Distribution of employee savers by asset category – Percentage of the company
savings plan and Value in Euros Statistics by group – Percentage of the company savings plan and Value in
Euros
Objective 2: Investigating how HC proxies influence investment behaviors Heckman two-step procedure
Step 1: Participation in each asset category (probit) Step 2: Amount invested in each asset category (OLS)
Marginal effects after Heckman
Objective 3: Investigating how the number of investment choices offered influences investment behaviors Poisson Regression Marginal effects after Poisson
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Results Objective 1: Describing employees investment
behavior for each asset category offered (Main features) Distribution of employee savers by asset category:
Extreme investment strategies: High concentrations in company stocks (up to 100%) Very low investment in bonds (0%)
Most popular asset category: diversified funds category
Statistics by group: Very high exposure to company stocks of lower paid
employees (and not to other stocks) Stockholding uniformly distributed by age Compared to women, men invested twice the amount in
stocks.
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Objective 2: Investigating how HC proxies influence investment behaviors
RISKIER SAFER
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Objective 3: Investigating how the number of investment choices offered influences investment behaviors
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Discussion Extreme behaviors regarding company stocks:
Not due to the employer’s matching contribution policy Presence of non-monetary incentives
Discrepancies between participation and amount invested Threshold effect: Presence of a latent demand
Inclusion of several proxies of human capital Age Salary Financial expertise Education Time with company
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Conclusion 3 main results:
“Extreme investment strategies……not specifically due to human capital…
…but resulting from employer’s menu choice.”
Further research on the role of employer is needed in European countries
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Appendix
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