Does foreign institutional ownership matter for stock price synchronicity? International evidence

Tung Dang, Thi Thuy Anh Vo, Xuan Vinh Vo and Linh Thi My Nguyen

Journal of Multinational Financial Management, 2023, vol. 67, issue C

Abstract: We investigate the relation between foreign institutional ownership and stock price synchronicity, and whether this relation varies across country-level institutional and information infrastructures. Using a comprehensive dataset for firms across 40 countries over the period between 2000 and 2016, we document the following notable findings. First, foreign institutional ownership is negatively associated with stock price synchronicity. Second, we find that improved information transparency is a possible channel underlying the effect of foreign institutional ownership on stock price synchronicity. In addition, the synchronicity-reducing effect of foreign institutional ownership is more pronounced for firms in countries with weaker institutional infrastructures. Finally, our results reveal different impacts of foreign institutional ownership on stock price synchronicity across various types of foreign institutional ownership, highlighting the importance of foreign investor heterogeneity in improving firm information environment.

Keywords: Foreign institutional ownership; Stock price synchronicity; Information environments; Institutional characteristics (search for similar items in EconPapers)
JEL-codes: G14 G15 G23 G30 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:mulfin:v:67:y:2023:i:c:s1042444x23000026

DOI: 10.1016/j.mulfin.2023.100783

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