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

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posted on 2023-06-10, 01:47 authored by Qiyu ZhangQiyu Zhang, Xiaoxiang ZhangXiaoxiang Zhang, Ding Chen, Roger StrangeRoger Strange
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.

Funding

Sustainable investing by mutual funds and their transparency level to end investors: the impacts on managerial myopic R&D investment behaviour; G2968; BRITISH ACADEMY; SRG1920/101581

History

Publication status

  • Published

File Version

  • Accepted version

Journal

International Review of Financial Analysis

ISSN

1057-5219

Publisher

Elsevier

Volume

79

Page range

1-13

Article number

a101965

Department affiliated with

  • Accounting and Finance Publications

Research groups affiliated with

  • Business and Finance Research Group Publications

Full text available

  • Yes

Peer reviewed?

  • Yes

Legacy Posted Date

2021-12-02

First Open Access (FOA) Date

2023-05-08

First Compliant Deposit (FCD) Date

2021-12-01

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