A tale of two forms of proximity: Geography and market

Chune Young Chung, Hong Kee Sul and Kainan Wang

Journal of Business Research, 2021, vol. 122, issue C, 14-23

Abstract: The existing research on institutional distance fails to distinguish between geographic and market proximity when investigating the relationship between proximity and investors’ performance. We utilize a unique empirical setting—Chinese firms whose stocks are listed on U.S. exchanges—to examine the stand-alone effects of these two forms of proximity on equity performance. We find that institutional ownership predicts stock returns in the case of U.S. and Chinese (Hong Kong) institutions, but this relationship does not hold for institutions from other countries. These findings are consistent with the hypothesis that U.S. institutions benefit from a market proximity advantage, whereas Chinese institutions have a geographic proximity advantage.

Keywords: Chinese cross-listed stock; Financial institution; Geographic proximity; Market proximity; Information asymmetry (search for similar items in EconPapers)
JEL-codes: G11 G15 G20 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbrese:v:122:y:2021:i:c:p:14-23

DOI: 10.1016/j.jbusres.2020.08.060

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