ویژگی ها و عملکرد موسسات سرمایه گذاری و سرمایه گذاران خارجی در بازار سهام ژاپن و کره

This study examines the characteristics of the stock ownership by institutional and foreign investors, as well as their effects on stock price performance in Japan and Korea. The main results of this study are summarized as follows. First, foreign investors have a clearer preference for stocks with large capitalization and low book-to-market ratios than do institutional investors in both Japanese and Korean stock markets. Second, foreign investors prefer stocks with a high return on equity, especially in Korea. Third, average returns have more apparent differentiation among institutional (foreign) ownership portfolios than among foreign (institutional) ownership portfolios in Japan (Korea). Fourth, the stocks that are preferred simultaneously by both institutional and foreign investors show statistically significant positive abnormal returns in both Korea and Japan, whereas those preferred by either institutional or foreign investors show statistically significant positive abnormal returns only in Korea. The institutional investors' incentive for stock holding, the extent of stock market efficiency, and stock price polarization could be the possible explanations for the different empirical results observed for Japan and Korea. J. Japanese Int. Economies21 (2) (2007) 195–213.

One of the most prominent phenomena in US stock markets over the past two decades has been the rapid increase in the level of stock ownership and trading by institutional investors. Currently, institutional investors own more than 50% of stocks listed on the New York Stock Exchange, which is a common phenomenon observed in stock markets throughout the world today to greater or lesser degrees. As the importance of institutional investors in stock markets increases, both the characteristics of their investment behavior and their impact on stock prices are becoming the subject of intensive discussion and research among academics and practitioners. A few studies have examined the preferences of institutional investors for their portfolio stocks. As institutional investors are fiduciaries that invest and manage portfolios on behalf of their trustors' interests, they must always be prepared to meet the demand for redemption. In cases where some restrictions affect their investment decisions, the preferences of institutional investors for stocks might be strikingly different from those of individual investors. Falkenstein (1996) finds that US mutual funds prefer stocks with larger capitalization, higher liquidity, higher prices and more available information. Gompers and Metrick (2001) report that the 100 largest institutional investors are likely to buy stocks with larger capitalization, higher liquidity, higher book-to-market ratio (henceforth B/M), and lower return for the previous year in US stock markets. Regarding the regulatory factor applied to institutional investors, Del Guercio (1996) shows that the so-called “prudent-man rule” affects the portfolio selection of institutional investors. In an intertemporal context, Bennett et al. (2003) report that institutional investors have shifted their preferences toward smaller and riskier stocks over time. The empirical evidence that institutional investors share common preferences for stocks in their portfolio implies that their trading behavior might show similar patterns. Herd behavior and positive feedback trading are two controversial issues in current institutional trading. While Lakonishok et al. (1992) find some evidence against institutional herd behavior, Nofsinger and Sias (1999) and Wermers (1999) provide supporting evidence in US stock markets. Recently Kim and Nofsinger (2005) show institutional herd behavior in Japan, but not as strong as in the US. Institutional positive feedback trading is also observed by Nofsinger and Sias (1999), Wermers (1999), but not by Lakonishok et al. (1992). The next issue following the preferences and trading behavior of institutional investors is the effect of their trading on stock prices. Both Lakonishok et al. (1992) and Chan and Lakonishok (1993) fail to provide any significant evidence that institutional trading is either stabilizing or destabilizing stock markets. Gompers and Metrick (2001) find that the premium for small stocks almost completely disappeared in US stock markets as the importance of institutional investors increased. Recently, Chiyachantana et al. (2004) report that the underlying market condition is a major determinant of the price impact and of the asymmetry between price impacts of institutional buy and sell orders. For stock markets outside the US, especially emerging markets, similar research has been conducted on foreign investors in lieu of institutional investors. Since the late 1980s many countries have allowed foreigners to invest in their stock markets. As a consequence, the importance and influence of foreign investors in these stock markets has been dramatically rising. Kang and Stulz (1997) examine the preferences of foreign investors in Japanese stock markets and reveal that they prefer stocks of manufacturing industries with large capitalization, good accounting performance, low unsystematic risk, and low leverage. Kamesaka et al. (2003) find that both foreign and individual investors in Japan follow a positive feedback trading strategy, and that foreign investors have superior performance. The positive feedback trading of foreign investors is also observed by Choe et al. (1999) in Korea, by Grinblatt (2000) in Finland, by Dahlquist and Robertsson (2001) in Sweden, and by Froot et al. (2001) in 44 countries. In particular, Choe et al. (1999) find no evidence of a destabilizing effect of foreign investors' positive feedback trading on the Korean stock market during the 1997 financial crisis period. As highlighted in the above analyses, previous US studies focus on institutional investors and the studies of other countries, on foreign investors. No one has tried to study both institutional and foreign investors simultaneously from the viewpoint of stock ownership. This study investigates the characteristics and performance of both institutional and foreign investors' portfolios in Japanese and Korean stock markets—two leading stock markets in the northeast Asia. These markets have some common characteristics; namely, foreign investors are very much interested in them and institutional investors are still in the developing stages compared with those of US markets. Despite these similarities between Japanese and Korean stock markets, there are some striking differences between them. As Japan has a much longer stock market history than Korea, Japanese stock markets are generally perceived to be more developed (and possibly more efficient) than Korean stock markets. Although Japan opened its stock markets to foreign investors much earlier than Korea, the current percentage of foreign ownership in Japanese stock markets (18.3% as of March 2002) is much smaller than that in Korean stock markets (36% as of the end of March 2002). This phenomenon could result from the foreign investors' belief that they can beat the market more easily in Korea than in Japan. The nature and development of institutional investors between the two stock markets are also different. Japanese banks (the biggest institutional investors), generally, have a close relationship with industrial firms through mutual stock ownership; in other words, Japanese banks own stocks not for high investment return but for business relationship and control. In Korea, however, banks are not important institutional investors. Major Korean institutional investors, such as mutual funds, insurance companies, and National Pension Fund, usually invest in stocks for the purposes of their asset management. The different investment purposes of Japanese and Korean institutional investors could lead one to think that the return of Korean institutional investors would be better than that of their Japanese counterparts. In sum, Japan and Korea differ in degree of stock market efficiency, the nature and development of institutional investors, and the proportion of foreign investors. Under these different stock market environments, the characteristics and performance of institutional and foreign investors are important empirical issues to be investigated. Therefore, Japanese and Korean stock markets provide a good test bed for studying both institutional and foreign investors simultaneously. In this study, we analyze the performance of institutional and foreign investors based on their annual ownership in stock markets. Sample stocks are initially sorted into three portfolios based on the fraction of shares held by institutional investors (i.e., institutional ownership). The stocks in each institutional ownership portfolio are then further sorted into three portfolios based on the fraction of shares held by foreign investors (i.e., foreign ownership). Nine joint ownership portfolios of institutional and foreign investors are formed following this two-step procedure. To control for factors affecting stock returns other than institutional and foreign ownership, we employ the three-factor model suggested by Fama and French (1993). We examine the characteristics of institutional and foreign ownership portfolios, and test the existence of their abnormal returns. This study has two distinctive features. First, to our knowledge, this is the first attempt to analyze the investment behavior and performance of both institutional and foreign investors simultaneously with risk factors controlled for in Japanese and Korean stock markets. Second, following Fama (1998), this study uses actual market values of institutional and foreign ownership to compute the value-weighted ownership portfolio returns. It is believed that this weighting scheme provides the most accurate information about the portfolio returns that institutional and foreign investors actually realize in stock markets. The major empirical findings of this study are summarized as follows: First, firm size is more strongly correlated with foreign ownership than with institutional ownership. Second, foreign ownership and B/M ratio are negatively correlated, which suggests that foreign investors prefer “growth” stocks to “value” ones. Third, average returns have more apparent differentiation among institutional (foreign) ownership portfolios than among foreign (institutional) ownership portfolios in Japan (Korea). The highest institutional and foreign ownership portfolio has the highest average returns of 0.40% and 2.04% in Japan and Korea, respectively. Fourth, the Fama–French three-factor model allows us to test the existence of abnormal returns after controlling for risk factors. While the stocks that are preferred simultaneously by both institutional and foreign investors show statistically significant positive abnormal returns in both Korea and Japan, the stocks that are preferred by either institutional or foreign investors show statistically significant positive abnormal returns only in Korea. The pattern of abnormal returns suggests that each independent ownership effect of either institutional or foreign investors on stock performance exists only in Korea, while there is a joint effect of institutional and foreign ownership in both Japan and Korea. The remainder of this paper is structured as follows. Section 2 explains the data and methodologies used in the study. Section 3 examines the preferences of institutional and foreign investors using characteristic variables, such as firm size, B/M ratio, and return on equity (henceforth ROE); in addition, it also evaluates the average returns and volatilities of nine joint ownership portfolios. Section 4 provides empirical evidence on the existence of abnormal returns. Section 5 concludes the paper with a brief summary.

The increase in the level of stock ownership by institutional investors is a common phenomenon observed in stock markets around the world. The importance and influence of foreign investors are increasing, especially in Asian stock markets. This study examines not only the characteristics of the stock ownership by institutional and foreign investors, but also their effects on stock price performance in Japan and Korea. This study has two distinctive features. First, we believe that this is the first attempt to analyze the investment behavior and performance of both institutional and foreign investors simultaneously in Japan and Korea after controlling for well-known common factors. Second, the actual market values of institutional and foreign ownership are used to compute the returns on value-weighted ownership portfolios. We believe that this weighting scheme provides more appropriate information about the portfolio returns that institutional and foreign investors actually realize in stock markets. Our major empirical findings are as follows. First, firm size is more strongly correlated with foreign ownership than with institutional ownership, even though both correlations are statistically significant; portfolio characteristics also show that there is a strong relation between firm size and foreign ownership. Second, foreign ownership and B/M ratio are negatively correlated, which suggests that foreign investors prefer “growth” stocks to “value” ones; based on the positive correlation between foreign ownership and ROE, the latter is considered to be an important decision variable to foreigners investors. Third, average returns have more apparent differentiation among institutional (foreign) ownership portfolios than among foreign (institutional) ownership portfolios in Japan (Korea). The highest institutional and foreign ownership portfolio, (I3I3, F3F3), has the highest average returns of 0.40 and 2.04% in Japan and Korea, respectively. Fourth, the Fama–French three-factor model allows us to test the existence of abnormal returns after controlling for risk factors; while the stocks preferred simultaneously by both institutional and foreign investors show statistically significant positive abnormal returns in Korea as well as in Japan, those preferred by either institutional or foreign investors show statistically significant positive abnormal returns only in Korea. The pattern of abnormal returns suggests that each independent ownership effect of either institutional or foreign investors on stock performance exists only in Korea, while there exists a joint effect of institutional and foreign ownership in both Japan and Korea. While it is difficult to draw firm conclusions as to why Japanese and Korean stock markets produce somewhat different results, our study proposes three possible explanations. First, the institutional investors of both countries have significantly different incentives to hold stocks. Second, foreign investors have different nature between Japan and Korea. Third and finally, there has been stock price polarization in Korea, but not in Japan. Further studies on these issues will be required for other stock markets in the future.