Portfolio preferences of foreign institutional investors

By Rajesh K. Aggarwal, L. Klapper, Peter D. Wysocki. 2003

571 citations recorded by the source corpus.

The authors examine the relationship between foreign investment and the attributes of emerging market countries and firms in which investment is made. Their findings indicate that countries with higher levels of economic development and floating exchange rate regimes tend to have greater ability to obtain foreign capital. After controlling for the country's level of economic development, they find that firms in countries with stronger shareholder rights and legal framework attract more foreign capital. The authors also find that foreign institutions allocate more of their assets to firms with better corporate governance after controlling for other country and firm attributes. The main firm-level measures of corporate governance are derived from accounting quality variables. Their results imply that steps can be taken both at the country and the firm level to create an environment conducive to foreign portfolio investment. The analysis is based on a unique dataset consisting of equity positions of U.S. mutual funds in emerging markets.

Subfields: Accounting, Finance

View Paper: https://www.semanticscholar.org/paper/489655ce794f4563934ab0fba1fcf6aefab3db05

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Citations in the corpus

Cultural influences on home bias and international diversification by institutional investors (2011, background): “Aggarwal, Klapper, and Wysocki (2005) show that US funds targeting emerging markets invest more in large visible firms with more transparent accounting policies.”
New institutional accounting and IFRS (2011, unknown): “Aggarwal et al. (2005) present evidence suggesting that accounting reporting quality has investment effects that show up at both the firm and country level and that there are important interactions between the firm-level and country-level decisions.10 Leuz et al. (2008) present evidence that firms…”
Government Quality Determinants of Stock Market Performance in African Countries (2011, unknown): “Some authors have pointed to the importance of legal environments and corporate standards in fund manager investments (Aggarwal et al., 2002).”
Corporate Governance, Corporate Ownership, and the Role of Institutional Investors: A Global Perspective (2003, unknown): “Further, the authors find that larger decreases in institutional ownership are associated with a higher probability of an outsider being appointed to succeed the CEO.”
Accounting Standards and International Portfolio Holdings (2014, background): “attributes that prior literature has shown affect cross-border holdings (Aggarwal et al. 2005; Barth et al. 2008).”
U.S. Investors' Emerging Market Equity Portfolios: A Security-Level Analysis (2003, unknown): “To understand the difference in the scope of the data sets, note that the mutual fund holdings in Aggarwal et al. (2003) comprise only 8% of all U.”
Ownership as a Form of Corporate Governance (2010, unknown): “Owner heterogeneity is also changing as foreign institutional investors and state owned funds increasingly invest in a wide range of developed economy firms (Aggarwal et al., 2005).”
Home Bias, Foreign Mutual Fund Holdings, and the Voluntary Adoption of International Accounting Standards (2007, unknown): “Importantly, these studies suggest that high information costs are an important factor helping to explain home bias (Kang and Stulz, 1997; Ahearne et al., 2004; Chan et al., 2005). For example, Kang and Stulz (1997) document that U.”