In this research we are interested in examining the effects of controlling shareholder diversification on firms’ operating strategies and outcomes. Our project involves the following logical building blocks:
1.Firms vary with respect to the degree of controlling shareholder diversification.
2.Firms’ controlling shareholder diversification feeds into their objective functions and in particular, their risk taking.
3.Operating strategies (such as investment/quantity/price decisions) as well as financial strategies (such as leverage and dividends) affect both the mean and variance of 
profits and depend on the degree of diversification of controlling shareholders. 
4.Firms’ strategies affect optimal strategies of their product market rivals. Product market competition can amplify the effects of controlling shareholders (lack of) 
diversification on operating and financial strategies. 
We contribute to the examination of the relation between owner diversification and firms’ strategies and outcomes along the following empirical and theoretical dimensions.
1.We use the most comprehensive data set (Amadeus) on both firms’ strategies and outcomes and on the diversification of controlling owners. which allows examining continuous distributions of controlling shareholders’ degrees of diversification. 
2.We provide a theoretical analysis demonstrating the effects of shareholder diversification and public/private status on equilibrium ROA, profitability, and investment. 
3.We examine the effects of product market competition on the differences between ROA, profitability, and investment of public and private firms and, more generally, 
the effects of product market competition on the relation between controlling owners’ diversification on firms’ strategies and outcomes. 
4.We examine the effects of volatility shocks on the relation between controlling shareholders’ diversification on one side and ROA, profitability, sales growth, and 
investment on the other side.