Information asymmetry, disclosure and foreign institutional investment: An empirical investigation of the impact of the Sarbanes-Oxley Act

Nida Abdioglu, Vassiliki Bamiatzi, S.Tamer Cavusgil, Arif Khurshed and Konstantinos Stathopoulos

International Business Review, 2015, vol. 24, issue 5, 902-915

Abstract: Do foreign institutional investors (FII) regard the introduction of rigorous disclosure requirements as a major incentive to invest in U.S. equities? We investigate the role of information asymmetry and the impact of firm-level disclosure on FII decisions. We use a unique context for analysis -- the enactment of the Sarbanes-Oxley Act (SOX), and find that foreign institutional investors increase their equity holdings in U.S. listed firms following the passage of SOX. The increase in U.S. equity holdings is largely accounted by passive, non-monitoring FII, who have the most to gain from the SOX-led reduction in the value of private information.

Keywords: Active and passive institutional investors; Information asymmetry; Institutional foreign investors; Sarbanes-Oxley Act (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:iburev:v:24:y:2015:i:5:p:902-915

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DOI: 10.1016/j.ibusrev.2015.04.001

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