Equity home bias and corporate disclosure

Stefan Eichler

Journal of International Money and Finance, 2012, vol. 31, issue 5, 1008-1032

Abstract: I show that more comprehensive corporate disclosure reduces investors’ uncertainty about domestic companies’ payoffs at no cost, thereby decreasing investors’ equity home bias toward a country. Since investors should base their investment decisions on valid and easily interpretable company information only, more comprehensive disclosure will reduce the home bias only if domestic securities law is sufficiently stratified and domestic companies use international accounting standards. Using panel data for 38 countries from 2003 to 2008 I find that more comprehensive disclosure reduces investors’ home bias, though significantly only for countries that sufficiently enforce their securities law and implement international accounting standards.

Keywords: Corporate disclosure; Equity home bias; Portfolio allocation (search for similar items in EconPapers)
JEL-codes: G11 G15 K22 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (18)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:31:y:2012:i:5:p:1008-1032

DOI: 10.1016/j.jimonfin.2011.12.008

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