Country-level foreign institutional investment horizons, excess cash holdings, and firm value: International evidence

Imad Rahim (), Rehman U. Mian () and Affan Mian ()
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Imad Rahim: NUST Business School, National University of Sciences and Technology
Rehman U. Mian: NUST Business School, National University of Sciences and Technology
Affan Mian: University of Chicago Booth School of Business

No 13815929, Proceedings of Economics and Finance Conferences from International Institute of Social and Economic Sciences

Abstract: Using a sample of 15,332 firms from 32 countries over 2007 and 2018, this study investigates the impact of country-level heterogeneity in foreign institutional investment horizons on the value of excess cash holdings. We use a country-level adjustment to the investment horizon approach of Gaspar et al. (2005) to measure the country-level horizons of foreign institutional investors (FIIs). The findings reveal that long-term country-level FIIs significantly increase the value of excess cash holdings. The impact of short-term country-level FIIs remains statistically insignificant. We obtain qualitatively unchanged results in the additional checks for robustness. Overall, our results highlight the significance of country-level heterogeneity in the monitoring efficacy of FIIs in corporate strategic decisions across individual portfolio countries.

Keywords: Investment horizon; Cash holdings; Foreign institutional ownership; International corporate governance, Firm value (search for similar items in EconPapers)
JEL-codes: G23 G32 G34 (search for similar items in EconPapers)
Pages: 12 pages
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Published in Proceedings of the Proceedings of the 18th Economics & Finance Conference, London, Nov -0001, pages 87-98

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