مالکیت بزرگ خارجی و قیمت ارزشمند سهام در سراسر جهان

This study investigates the relation between large foreign ownership (LFO) and the informativeness of stock prices in 40 markets. We show that LFO is positively related to price informativeness, measured by probability of informed trading (PIN) and price non-synchronicity (NONSYNC) which reflects firm-specific variations in stock returns. We also find a stronger association between stock returns and future earnings innovations for firms with higher LFO. Further analysis reveals that the effect of LFO on price informativeness is stronger in developed economies and markets with strong investor protection and a transparent information environment.

Foreign investors have emerged as an important group of investors in many financial markets. Take our sample of 2002 as an example, foreigners on average owned 28% of shares in 3189 firms in 40 markets. Given the significant presence of foreign investors in local markets, the specific roles played by foreign investors in local markets have attracted considerable attention from both academics and policy makers. One stream of research has studied the effects of foreign equity investments on the real side of invested firms and local economy, such as productivity, investment and growth (e.g., Henry, 2000a; Bekaert et al., 2005, 2009). Another stream of research examines properties of stock prices including liquidity (Bekaert et al., 2007; Rhee and Wang, 2009), return volatility (Bae et al., 2004; Li et al., 2011), and the cost of capital (Bekaert and Harvey, 2000; Henry, 2000b). This study investigates whether foreign investors, particularly large foreign investors (LFO), affect the extent to which stock prices incorporate value-relevant information and thus are informative about a firm's fundamental value. In an efficient market, stock prices incorporate all the available information and reflect a firm's intrinsic value. However, prices could fail to reveal all the available information because of various frictions such as information cost ( Grossman and Stiglitz, 1980) and limits to arbitrage ( Shleifer and Vishny, 1997). Consequently, the degree of price informativeness varies across firms and has important implications for both managers and investors. More informative stock prices can help managers make better decisions in capital investment, resulting in higher efficiency in capital allocation and corporate investment ( Wurgler, 2000; Durnev et al., 2004; Chen et al., 2007). Informative prices also reduce the risk for uninformed investors and thus lower the cost of capital for the firm ( Fernandes and Ferreira, 2009). Therefore, given foreign investors' substantial share ownership, it is important to understand the impact of foreign investors on a firm's stock price informativeness. The existing literature suggests two potential channels through which large foreign shareholders could improve the informativeness of stock prices of the invested firm. First, large foreign shareholders could improve the informativeness of stock prices through their informed trading. Compared with small shareholders, large shareholders tend to have a stronger incentive and better capability to collect and process value-relevant information.4 Thus the information-based trading by large shareholders, for example, selling their stakes upon negative information, facilitates the capitalization of fundamentals into stock price (Edmans and Manso, 2011; Admati and Pfleiderer, 2009; Edmans, 2009).5 Second, large foreign shareholders could enhance price informativeness by improving corporate governance and disclosure quality of the invested firms.6Jin and Myers (2006) show that poor investor protection and opaque financial disclosure reduces price informativeness. The reason is that managers and controlling shareholders tend to engage in self-dealing activities to extract private benefits at the expense of other shareholders (e.g., Shleifer and Vishny, 1989; Morck, 1996). To camouflage their self-dealing activities, managers may withhold information or manipulate accounting disclosure, which makes stock prices less informative about a firm's fundamentals (Fan and Wong, 2002; Jin and Myers, 2006; Gul et al., 2010). Furthermore, agency problems could deter sophisticated investors from engaging in costly and risky informed arbitrage, which also reduces the amount of relevant information in stock prices (Morck et al., 2000). If large foreign shareholders, due to their significant interest at stake, closely monitor managers and constrain agency problems, we expect to find more informative stock prices. However, it remains an empirical question whether large foreign investors can be effective monitors of local managers and insiders. On the one hand, relative to domestic shareholders, foreign shareholders may incur a higher cost to collect relevant information to effectively monitor insiders due to the geographic and cultural distance (Kang and Kim, 2008, 2010). On the other hand, large foreign shareholders would be less engaged with insiders compared with their domestic counterparties, which could facilitate their monitoring role. Further, the differences in corporate governance practices between the home country and the host country could also make large foreign shareholders more effective monitors of insiders compared with their domestic counterparties, especially for those large foreign shareholders coming from “good governance” countries and investing in “poor governance” countries (Kho et al., 2009). We define large foreign shareholders as those ultimate owners who own more than 5% of outstanding shares of a firm and are domiciled outside the country of the invested firm.7LFO is calculated as the percentage of shares outstanding owned by all large foreign shareholders. Following the literature, we employ two measures of price informativeness: probability of informed trading (PIN) and price non-synchronicity (NONSYNC). Developed by Easley et al. (1997), PIN is the ratio of informed trading intensity to total trading intensity and thus measures the probability of trades placed by informed traders. The market micro-structural model in Easley et al. (1997) indicates that the higher the PIN, the greater the amount of information in stock prices. 8 Building on this insight, a few studies have used PIN to measure price informativeness (e.g., Easley et al., 1996, 1998, 2002; Chen et al., 2007; Brockman and Yan, 2009, Ferreira et al., 2011). Our second proxy for price informativeness, NONSYNC, is based on firm-specific variations in stock returns. Specifically, we compute NONSYNC as a logistic transformation of the R-square from the regression of stock returns on returns of the local market index and US market index. Roll (1988) is one of the first to suggest that firm-specific return variation might capture the rate of information incorporation into stock prices through trading. 9 Morck et al. (2000) propose the use of this variable to measure the informativeness of stock prices. Recent empirical evidence supports the view that large firm-specific return variation indicates more informative stock prices. For example, Durnev et al. (2003) show that firm-specific return variation is positively related to the extent to which stock returns reflect future earnings information. NONSYNC is also found to be positively associated with the efficiency of capital allocation ( Wurgler, 2000; Durnev et al., 2004; Chen et al., 2007). In the literature, NONSYNC has been employed to measure price informativeness in a number of studies (see, for example, DeFond and Hung, 2004; Piotroski and Roulstone, 2004; Chan and Hameed, 2006; Daouk et al., 2006; Bris et al., 2007; Brockman and Yan, 2009). Using a cross section of 3189 firms in 40 markets in 2002, we find that LFO is positively related to both proxies of stock price informativeness, PIN and NONSYNC. This positive relation is robust to the control of lagged price informativeness, and a number of firm and country characteristics. To gauge the economic significance of the effect of LFO, we show that if LFO increases from the first quartile (9%) to the third quartile (45%) in the sample, PIN would increase by 1.5–2.3 percentage points. The effect of LFO is stronger than that of any other firm characteristic included in the regressions except for firm size which is typically found to be the most significant determinant of PIN ( Aslan et al., 2011). 10 Analysis based on NONSYNC gives similar inferences about the economic significance of LFO. Overall, the results suggest that LFO is an important determinant of price informativeness for our sample firms. To shed further light on the effect of LFO on price informativeness, we examine whether companies with high LFO have stock prices that contain more information about future operating performance measured by earnings. Our results show that for firms with higher LFO, current stock returns are more significantly related with contemporaneous and future earnings innovations. This evidence suggests that stock prices of high LFO firms are more informative about firms' future earnings, which provides a more direct support for the effect of LFO on price informativeness. We proceed to investigate whether the association between LFO and price informativeness varies systematically with country-level corporate governance and information infrastructure. This investigation helps understand whether local institutional infrastructures complement or substitute LFO in improving price informativeness, and thus deepens our understanding of the mechanisms underlying the informational role of large foreign shareholders. Prior literature offers two competing views. One view is that large foreign shareholders may play a more important role in markets with weaker governance and a poorer information environment. In these markets, monitoring by large foreign shareholders serves as a substitute for weak institutional infrastructures, and the marginal benefit of improving firms' governance and transparency could be higher. Further, due to the bonding of home-country laws and the lack of engagement with insiders, foreign investors may serve as more effective monitors of insiders in markets with poor governance ( Kho et al., 2009). The other view suggests a stronger informational role of large foreign shareholders in markets with better governance and information environment, due to a complementary effect between institutional infrastructures and firm-level governance, as suggested by Doidge et al. (2007). In these markets, the cost of collecting information and monitoring insiders is lower, which could facilitate the informational role of large foreign shareholders. Therefore, it is an empirical question as to whether large foreign shareholders play a larger or smaller informational role in markets with stronger governance and better information infrastructures. Using several measures of the strength of investor protection and information disclosure, we find that the association between LFO and measures of price informativeness is stronger in markets with stronger investor protection and better information disclosure. Furthermore, the association between stock returns and future earnings innovations increases with LFO more significantly in these markets. These results suggest that large foreign shareholders play a larger informational role in markets with stronger investor protection and better information disclosure, which supports the view of complementarity between market-level and firm-level governance forces. Our paper contributes to the literature on the role of foreign equity investment in local markets in three ways. First, we document an important economic benefit associated with foreign equity investment, i.e., improved informativeness of stock prices. Second, while most of the existing studies focus only on the effect of foreign equity investment in emerging markets, we study the effect of LFO on stock price informativeness in both emerging and developed markets. We also show that the role of foreign shareholders could vary significantly across markets. Third, we employ a measure of actual large foreign ownership to study the effect of foreign equity investment in local markets, while most existing studies examine market liberalization events or use a stock investibility index to proxy for foreign equity investment. 11 While market openness and investibility are related to foreign investors' ability to invest in local markets, they don't necessarily correspond to the exact holdings of foreign investors. Two recent studies are closely related to ours. Gul et al. (2010) examine the relationship between foreign equity ownership and the firm-level information environment in China. They compare a measure of stock price non-synchronicity between firms issuing only A-shares, which are invested almost exclusively by domestic investors, and firms issuing A-shares along with B-shares or H-shares, both of which are invested almost exclusively by foreign investors.12Bae et al. (2012) find that, in 21 emerging markets, a stock's investibility by foreign investors is positively related to the timeliness of incorporating global market information into stock prices. Our paper also connects to a large stream of literature on block ownership. In particular, Brockman and Yan (2009) find evidence that aggregate block ownership is positively associated with the informativeness of stock prices in the US market. However it is unclear whether their evidence is applicable to other markets, since there are significant differences between large foreign shareholders and domestic block shareholders in their monitoring role and information advantage. Furthermore, the international setting allows us to examine whether the roles played by blockholders vary with country-level governance and information infrastructures. Our results show that strong investor protection and transparent information environment facilitates large foreign shareholders' role in improving price informativeness. Finally, our paper adds to an emerging set of literature on the interaction between market-level and firm-level governance forces. Bergman and Nicolaievsky (2007) model the choice of how much investor protection and related mechanisms by firms depends on the legal and investor protection regime of the market. Doidge et al. (2007) find that observable firm characteristics explain much less of the variance in governance ratings than country characteristics, and especially lack explanatory power in less developed markets. Li et al. (2011) show the stabilizing role of large foreign shareholders is more profound in markets with better corporate governance. Our study provides further support on this complementarity view of market-level and firm-level governance forces by showing that large foreign shareholders play a larger role in markets with stronger investor protection and better information disclosure. The paper proceeds as follows. In Section 2 we describe the construction of key variables and data. In Section 3 we present and discuss our empirical results. And finally we conclude in Section 4.

With the increase in cross-border equity investments due to financial globalization, the economic roles played by foreign equity investors attract significant attention from both regulators and academics. In terms of asset pricing implications, most existing studies focus on the benefits of risk-sharing among investors across borders and the reduction in cost of capital associated with the lifting of the cross-border investment barriers. In this study, we investigate another potential economic benefit of foreign equity investment, the improved informativeness of asset prices, which has not been sufficiently studied in existing literature. Specifically, we study the informational role of large foreign shareholders who are expected to matter most among foreign equity investors. Using a cross section of 3189 firms from 40 markets in 2002, we find evidence that firms with a higher LFO tend to have more informative stock prices, measured by the probability of informed trading and price non-synchronicity. Further, stock prices of these firms also tend to be more informative about contemporaneous and future earnings innovations. These results suggest that large foreign shareholders contribute to the informativeness of stock prices. Using several measures of the strength of macro governance infrastructure, we find that LFO seems to matter more in markets with stronger macro governance forces, such as those with a more developed economy, better investor protection, and a more transparent information environment. These findings are consistent with macro governance forces facilitating the effect of LFO on price informativeness, and echo recent evidence of the complementarity between market-level and firm-level governance forces in Doidge et al. (2007). Overall, our findings shed some light on the roles of foreign investors in local markets and the effects of capital market opening. We find evidence consistent with the positive role of large foreign shareholders in improving the informativeness of stock prices in local markets. Further, macro governance infrastructure seems to affect the extent to which large foreign shareholders could play this informational role. Our study is subject to several limitations. First, price informativeness is unobservable and we have to make inferences based on some empirical proxies. Both proxies of price informativeness, the probability of informed trading (PIN) and price non-synchronicity (NONSYNC), have been shown to capture the information content of prices theoretically and empirically in the previous literature (e.g., Easley et al., 1997; Morck et al., 2000). We also substantiate the findings with further evidence based on a more direct and intuitive measure of price informativeness – the extent to which stock returns reflect earnings news. However, we are aware that the validity of inferences that we draw from our results depends on whether our measures of price informativeness adequately capture the extent to which information is incorporated into stock prices. We caution readers of this important assumption when interpreting our results. Second, our inferences are based on the cross-sectional regression results, which reveal correlations rather than causality. We address the endogeneity issue partially by running regressions of price informativeness measures in year 2003 on LFO and control variables in year 2002. Further, our findings from cross-market analyses are difficult to be explained by the reverse causality. However, due to data limitations, we are unable to conduct more sophisticated analyses such as Granger causality test and (semi) natural experiment, to infer the causality more directly. Given these limitations, we are unable to completely exclude alternative explanations, and we again caution readers of this issue.