Firms as Portfolios: A Mean-Variance Analysis of Unquoted UK Companies

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This paper adopts a mean-variance portfolio framework to model the balance sheet behaviour of unquoted companies with respect to choice items such as fixed investment, investment in stocks, trade credit, and borrowing. Econometric results for a sample of 39 UK firms are consistent with many of the restrictions implied by portfolio theory, in particular that these balance sheet items are jointly determined.