Suchergebnisse

AbstractResearch Question/IssueThis study aims to investigate the role of foreign institutional investors (FIIs) on corporate risk‐taking in an international context. We conjecture that FIIs play a role in encouraging firms to take risks and can substitute country‐level corporate governance in determining corporate risk‐taking.Research Findings/InsightsEmploying a large sample of 17,698 firms across 42 economies, we show that foreign institutional ownership positively influences corporate risk‐taking. This positive relation is achieved through the monitoring channel and the insurance channel. Furthermore, we show that FIIs substitute country‐level corporate governance in determining corporate risk‐taking, indicating that FIIs play a significant role in promoting risk‐taking in economies with weaker governance. In addition, debtholders view FIIs' risk‐promoting role negatively and use more restrictive covenants to protect themselves.Theoretical/Academic ImplicationsThis study provides empirical support for the role of FIIs on corporate investment decisions, thus complementing the existing literature. In addition, our paper documents that country‐level corporate governance and FIIs are substitutes in determining corporate risk‐taking, thus shedding additional light not only on the role of country‐level corporate governance but also on its controversial joint role with FIIs.Practitioner/Policy ImplicationsFIIs from economies with stronger corporate governance are particularly effective at promoting corporate risk‐taking in economies with weaker corporate governance, providing a new channel through which foreign investments can influence economic growth in developing economies. Therefore, policymakers should carefully consider and trade off the costs and benefits of foreign investment when proposing relevant policies.

ABSTRACTThe objective of this study is to examine the role of foreign institutional investors (FIIs) in firms' choice of debt. Using a large sample of firms from 40 countries, we find that FIIs are positively associated with the propensity of firms to access the public debt market and the subsequent issuance of new public debt. In contrast, we find no relationship between domestic institutional ownership and public debt. Our results are robust to various specifications, including a 2SLS regression model, a change model, a Heckman two-stage model and propensity score matching model, and a quasi-natural experiment using the exogenous relaxation of foreign equity restrictiveness. Cross-sectional tests further show that findings are stronger for firms with poorer accruals quality, with higher levels of information asymmetry, and firms domiciled in countries with weaker creditor protection. Collectively, our findings suggest that FIIs play a vital role in facilitating firms' public debt financing.

We find that foreign institutional investors (FIIs) reduce their investee firms' tax avoidance. We provide evidence that the effect is driven by the institutional distance between FIIs' home countries/regions and host countries/regions. Specifically, we find that the effect is driven by the influence of FIIs from countries/regions with high-quality institutions (i.e., common law, high government effectiveness, and high regulatory quality) on investee firms located in countries/regions with low-quality institutions. Furthermore, we show that the effect is concentrated on FIIs with little experience in the investee countries/regions or FIIs with stronger monitoring incentives. Finally, we find that FIIs are more likely to vote against management if the firm has a higher level of tax avoidance.

The study aimed to empirically investigate the impact of board diversity variables (age, gender, nationality, education, tenure, and expertise) on the investment preferences of foreign institutional investors in an emerging market, China. For this, sample data consisted of 1374 nonfinancial Chinese firms from 2009 to 2018. The study used OLS regression as a baseline regression, a fixed effect model to control omitted variable bias, and the two-step systems GMM model to control the endogeneity problem. The study revealed that board diversity variables (gender, nationality, education, and financial expertise) are positively associated with foreign institutional ownership in Chinese nonfinancial firms, implying that foreign institutional investors own a high percentage of Chinese nonfinancial firms with diversity of gender, nationality, education, and financial expertise. Age and tenure of board diversity, on the other hand, have little correlation with foreign institutional ownership. Further, the robustness regressions also confirmed the relationship between board diversity and foreign institutional ownership. This study made a unique attempt to provide empirical evidence that firms having diverse boards attract foreign institutional ownership by reducing asymmetric information.

The study aimed to empirically investigate the impact of board diversity variables (age, gender, nationality, education, tenure, and expertise) on the investment preferences of foreign institutional investors in an emerging market, China. For this, sample data consisted of 1374 nonfinancial Chinese firms from 2009 to 2018. The study used OLS regression as a baseline regression, a fixed effect model to control omitted variable bias, and the two-step systems GMM model to control the endogeneity problem. The study revealed that board diversity variables (gender, nationality, education, and financial expertise) are positively associated with foreign institutional ownership in Chinese nonfinancial firms, implying that foreign institutional investors own a high percentage of Chinese nonfinancial firms with diversity of gender, nationality, education, and financial expertise. Age and tenure of board diversity, on the other hand, have little correlation with foreign institutional ownership. Further, the robustness regressions also confirmed the relationship between board diversity and foreign institutional ownership. This study made a unique attempt to provide empirical evidence that firms having diverse boards attract foreign institutional ownership by reducing asymmetric information.