Institutional conditions, economic policy uncertainty and foreign institutional investment in China

Lerong He, Liying Huang and Liting Fang

Emerging Markets Review, 2022, vol. 50, issue C

Abstract: This paper investigates the influence of host and home country institutional conditions on foreign institutional investment. Utilizing longitudinal and multilevel data on foreign institutional investment in Chinese listed firms between 2004 and 2017, we document that foreign institutional investment decreases with increasing economic policy uncertainty in the host nation. We also find that foreign institutional investors respond more strongly to local economic policy uncertainty when their home nations are closer to China, are culturally and administratively similar to China, operate a smaller domestic stock market, and have weaker minority shareholder protection. The impact of economic policy uncertainty on foreign institutional investment is also stronger when the host nation institution is more developed and open.. Moreover, we reveal the mediating role of stock market volatility on this relationship. Overall, we document that foreign institutional investment is not only shaped by institutional conditions in the host country but also influenced by home country characteristics that define geographical and institutional distance between home and host nations.

Keywords: Foreign institutional investors; Institutional conditions; Economic policy uncertainty; International finance; QFII; China (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1566014121000315
Full text for ScienceDirect subscribers only

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:eee:ememar:v:50:y:2022:i:c:s1566014121000315

DOI: 10.1016/j.ememar.2021.100823

Access Statistics for this article

Emerging Markets Review is currently edited by Jonathan A. Batten

More articles in Emerging Markets Review from Elsevier
Bibliographic data for series maintained by Catherine Liu ().