Work

Do Foreigners Invest Less in Poorly Governed Firms?

Year: 2008

Type: article

Abstract: As domestic sources of outside finance are limited in many countries around the world, it is important to understand factors that influence whether foreign investors provide capital to a country's firms. We study 4,409 firms from twenty-nine countries to assess whether and why concerns about corporate governance result in fewer foreign holdings. We find that foreigners invest less in firms that reside in countries with poor outsider protection and disclosure and have ownership structures that are conducive to governance problems. This effect is particularly pronounced when earnings are opaque, indicating that information asymmetry and monitoring costs faced by foreign investors likely drive the results.

Source: Review of Financial Studies

DOI: 10.1093/rfs/hhn089

Authors: Christian Leuz, Karl V. Lins, Francis E. Warnock

Institutions: National Bureau of Economic Research, University of Chicago, University of Utah, University of Virginia

Language: English

Topic: Corporate Finance and Governance

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Peace, justice, and strong institutions

Open Access status: green

OpenAlex ID: W3124821938