Foreign institutional investors and stock return comovement

Li Jiang (), Jeong-Bon Kim () and Lei Pang ()
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Li Jiang: Hong Kong Polytechnic University
Jeong-Bon Kim: City University of Hong Kong
Lei Pang: Hang Seng Investment Management

Frontiers of Business Research in China, 2018, vol. 12, issue 1, 1-31

Abstract: Abstract We investigate whether foreign institutional investors facilitate firm-specific information flow in the global market. Specifically, using annual institutional ownership data from firms across 40 countries, we find that foreign institutional ownership is negatively associated with excess stock return comovement. Our results are more pronounced when foreign institutional investors originate from common-law countries and hold a large equity stake in invested firms; and when the invested firms are located in civil-law countries. Overall, the evidence suggests that foreign institutional investors from countries with strong investor protection play an important informational role in mitigating excess stock return comovement around the world.

Keywords: Foreign institutional investors; Stock return comovement; Firm-specific information; Investor protection (search for similar items in EconPapers)
JEL-codes: G14 G15 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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DOI: 10.1186/s11782-018-0036-8

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