Foreign Investors, Stock Price Informativeness, and Multinational Corporations Public Deposited

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Last Modified
  • March 19, 2019
Creator
  • Han, Syung Jin
    • Affiliation: Kenan-Flagler Business School
Abstract
  • This study investigates the impact of foreign investors on stock price informativeness across 44 stock markets worldwide. I find that the positive relation between foreign institutional ownership and stock return volatility is moderated in firms with a larger proportion of foreign operations. This implies a stabilizing effect of foreign investors on stock prices of multinational corporations (MNCs). In addition, I find that current stock prices reflect more information about future earnings generated from foreign operations of firms with higher foreign institutional ownership. These results suggest that foreign investors have an informational advantage about foreign businesses of MNCs due to geographic proximity and such information is incorporated into local stock prices by their trading. Furthermore, I find that the type of information that foreign investors gather and interpret is about the demand for a firm’s products rather than about the technology used by the firm. Overall, this paper proposes a benefit of financial liberalization that foreign investors facilitate the transmission of information about foreign operations of MNCs in local stock markets.
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  • In Copyright
Advisor
  • Colacito, Riccardo
  • Lundblad, Christian
  • Wang, Sean
  • Jotikasthira, Chotibhak
  • Le, Anh
Degree
  • Doctor of Philosophy
Degree granting institution
  • University of North Carolina at Chapel Hill Graduate School
Graduation year
  • 2015
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  • Chapel Hill, NC
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