Foreign Ownership Restrictions and Equity Price Premiums: What Drives the Demand for Cross-Border Investments?

Warren Bailey, Y. Peter Chung and Jun-koo Kang

Journal of Financial and Quantitative Analysis, 1999, vol. 34, issue 4, 489-511

Abstract: We study the impact of barriers to international capital flows with stock price data from 11 countries whose stock markets feature shares restricted to locals and otherwise identical shares available to foreigners. Large price premiums for unrestricted shares relative to matching restricted shares are typically observed. Although basic notions of international asset pricing offer a straightforward explanation for the price premiums, we find little evidence that the price premiums are explained by lower foreign required returns. Alternative concepts and theories centering on foreign investor demand and the supply of shares explain some of the time-series and cross-sectional variation of price premiums. More specifically, premiums for unrestricted shares are positively correlated with foreign investor demand in the form of international mutual fund flows, sentiment implicit in matching closed-end country fund premiums, market liquidity, and information reflected in press coverage, country credit rating, and firm size.

Date: 1999
References: Add references at CitEc
Citations: View citations in EconPapers (79)

Downloads: (external link)
https://www.cambridge.org/core/product/identifier/ ... type/journal_article link to article abstract page (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cup:jfinqa:v:34:y:1999:i:04:p:489-511_00

Access Statistics for this article

More articles in Journal of Financial and Quantitative Analysis from Cambridge University Press Cambridge University Press, UPH, Shaftesbury Road, Cambridge CB2 8BS UK.
Bibliographic data for series maintained by Kirk Stebbing ().