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.

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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