Market discipline or rent extraction: Impacts of share trading by foreign institutional investors in different corporate governance and investor protection environments

Qiyu Zhang, Xiaoxiang Zhang, Ding Chen and Roger Strange

International Review of Financial Analysis, 2022, vol. 79, issue C

Abstract: Minority investors' reliance on market discipline can vary with different country-level investor protection and firm-level corporate governance environments, which affect both discipline and rent extraction incentives of foreign institutional investors (FIIs). Using data from 47 economies between 2009 and 2017, we find that firm value increases with FIIs aggressive trading but decreases with FIIs discreet trading. The positive and negative impacts of FIIs trading are strengthened when investor protection is stronger, but weakened when corporate governance is stronger. Our analysis enhances understanding of trade-offs of FIIs trading between discipline and rent extraction in different corporate governance and investor protection environments.

Keywords: Foreign institutional investors; Informed trading; Corporate governance; Market discipline; Institutional environment; Investor protection; Firm value (search for similar items in EconPapers)
JEL-codes: G14 G32 G34 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1057521921002830
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:finana:v:79:y:2022:i:c:s1057521921002830

DOI: 10.1016/j.irfa.2021.101965

Access Statistics for this article

International Review of Financial Analysis is currently edited by B.M. Lucey

More articles in International Review of Financial Analysis from Elsevier
Bibliographic data for series maintained by Catherine Liu ().