Employees’ investment behavior in a company savings plan Nicolas AUBERT, Université de la Méditerranée - Inseec Thomas RAPP, University of Maryland 1

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 2

Methods 3  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)  Measures Dependent variables:Independent variables: P ARTICIPATION IN EACH ASSET CATEGORY (0/1) => Binary outcome requires Probit A GE ( YEARS ) G ENDER ( MALE =1, FEMALE =0) A MOUNT INVESTED IN EACH ASSET CATEGORY (E UROS ) => Continuous outcome requires OLS S ALARY (E UROS ) T IME WITH COMPANY ( YEARS ) FUNDS SELECTED (N UMBER ) ASSET CATEGORIES SELECTED (N UMBER ) => Count outcome requires Poisson E DUCATION LEVEL ( MASTER DEGREE =1, 0 OTHERWISE ) P LACE OF RESIDENCE (P ARIS =1, OUTSIDE P ARIS =0) F INANCIAL EXPERTISE (Y ES =1, N O =0)

Methods (2) 4  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

Results 5  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 RISKIERSAFER

Objective 3: Investigating how the number of investment choices offered influences investment behaviors 7

Discussion 8  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

Conclusion 9  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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