Capital structure and monitoring by local owners

We examine how owners’ portfolio diversification influences their firms’ financial decision-making and performance. find that firms with high local ownership use less leverage, but by locally biased owners higher debt levels relative to diversified owners. Firms in urban regions levels. In rural regions, ownership. Finally, although we weak evidence underperform the market, underperformance is smaller Thus, owners, not portfolios, have an informed monitoring role firms, this effect seems mitigate negative liquidity consequences. The separation of into those portfolios determines when can be used as a good proxy for investors.