nach oben

Financial Markets and Portfolio Management

16.02.2024

Foreign versus domestic institutional ownership and stock price synchronicity in Taiwan

verfasst von: Pi-Yun Yang, Dun-Yao Ke, Kai-Chien Chen, Thi Bao Ngoc Nguyen

Erschienen in: Financial Markets and Portfolio Management

Einloggen

Aktivieren Sie unsere intelligente Suche, um passende Fachinhalte oder Patente zu finden.

search-config

KI-gestützte Suche

Aus

Abstract

There is limited research on the impact of foreign versus domestic institutional ownership on stock price synchronicity. Drawing upon the agency-linked external monitoring theory, this study examines a dataset of Taiwanese firms from 2004 to 2020. The findings demonstrate that foreign institutional ownership exerts a more negative influence on stock price synchronicity than domestic institutional ownership, especially in firms with high level of agency problems. These results support the hypothesis that foreign institutional investors effectively capture firm-specific information flows through external monitoring and hence reduce the synchronicity of stock prices. Furthermore, our additional findings suggest that foreign institutional ownership’s greater negative impact on synchronicity is more pronounced in firms with Big 4 auditors, extensive analyst coverage, and high media attention. This implies that foreign institutional entities serve as supplementary supervisory mechanisms in conjunction with other external monitors, contributing to mitigating stock price synchronicity. Consequently, our study resolves the ongoing debate regarding whether foreign or domestic institutional investors play a more significant role in gathering and processing firm-specific information.

Sie haben noch keine Lizenz? Dann Informieren Sie sich jetzt über unsere Produkte:

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

über 102.000 Bücher
über 537 Zeitschriften

aus folgenden Fachgebieten:

Automobil + Motoren
Bauwesen + Immobilien
Business IT + Informatik
Elektrotechnik + Elektronik
Energie + Nachhaltigkeit
Finance + Banking
Management + Führung
Marketing + Vertrieb
Maschinenbau + Werkstoffe
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Jetzt informieren

Springer Professional "Wirtschaft"

Online-Abonnement

Mit Springer Professional "Wirtschaft" erhalten Sie Zugriff auf:

über 67.000 Bücher
über 340 Zeitschriften

aus folgenden Fachgebieten:

Bauwesen + Immobilien
Business IT + Informatik
Finance + Banking
Management + Führung
Marketing + Vertrieb
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Jetzt informieren

https://www.state.gov/reports/2022-investment-climate-statements/taiwan/.

https://www.twse.com.tw/en/trading/statistics/index06.html.

Adams, J., Hayunga, D., Mansi, S., Reeb, D., Verardi, V.: Identifying and treating outliers in finance. Financ. Manag. 48(2), 345–384 (2019). https://doi.org/10.1111/fima.12269CrossRef

An, H., Zhang, T.: Stock price synchronicity, crash risk, and institutional investors. J. Corp. Financ. 21, 1–15 (2013). https://doi.org/10.1016/j.jcorpfin.2013.01.001CrossRef

Baik, B., Kang, J.-K., Kim, J.-M.: Local institutional investors, information asymmetries, and equity returns. J. Financ. Econ. 97(1), 81–106 (2010). https://doi.org/10.1016/j.jfineco.2010.03.006CrossRef

Bena, J., Ferreira, M.A., Matos, P., Pires, P.: Are foreign investors locusts? The long-term effects of foreign institutional ownership. J. Financ. Econ. 126(1), 122–146 (2017). https://doi.org/10.1016/j.jfineco.2017.07.005CrossRef

Borochin, P., Yang, J.: The effects of institutional investor objectives on firm valuation and governance. J. Financ. Econ. 126(1), 171–199 (2017). https://doi.org/10.1016/j.jfineco.2017.06.013CrossRef

Boubaker, S., Mansali, H., Rjiba, H.: Large controlling shareholders and stock price synchronicity. J. Bank. Finance 40, 80–96 (2014). https://doi.org/10.1016/j.jbankfin.2013.11.022CrossRef

Chan, K., Hameed, A.: Stock price synchronicity and analyst coverage in emerging markets. J. Financ. Econ. 80(1), 115–147 (2006). https://doi.org/10.1016/j.jfineco.2005.03.010CrossRef

Chen, X., Lai, Y.J.: On the concentration of mutual fund portfolio holdings: evidence from Taiwan. Res. Int. Bus. Finan. 33, 268–286 (2015)CrossRef

Chen, C.-L., Weng, P.-Y., Chien, C.-Y.: Qualified foreign institutional investor ownership deregulation and the restatement of financial reports—empirical findings from Taiwan. Int. Rev. Econ. Financ. 56, 465–485 (2018). https://doi.org/10.1016/j.iref.2017.12.005CrossRef

Chiu, J., Chung, H., Hung, S.-C.: Voluntary adoption of audit committees, ownership structure and firm performance: evidence from Taiwan. Emerg. Mark. Financ. Trade 57(5), 1514–1542 (2021). https://doi.org/10.1080/1540496X.2019.1635449CrossRef

Chuang, Y.-W., Lin, Y.-F., Weng, P.-S.: Why and how do foreign institutional investors outperform domestic investors in futures trading: evidence from Taiwan. J. Future Mark. 39(3), 279–301 (2019). https://doi.org/10.1002/fut.21975CrossRef

Chung, C.Y., Kim, H., Wang, K.: Do domestic or foreign institutional investors matter? The case of firm information asymmetry in Korea. Pac. Basin Financ. J. 72, 101727 (2022). https://doi.org/10.1016/j.pacfin.2022.101727CrossRef

Dang, T.L., Dang, M., Hoang, L., Nguyen, L., Phan, H.L.: Media coverage and stock price synchronicity. Int. Rev. Financ. Anal. 67, 101430 (2020). https://doi.org/10.1016/j.irfa.2019.101430CrossRef

Fang, H., Lu, Y.-C., Yau, H.-Y., Lee, Y.-H.: Causes and impacts of foreign and domestic institutional investors’ herding in the Taiwan stock market. Emerg. Mark. Financ. Trade 53(4), 727–745 (2017). https://doi.org/10.1080/1540496X.2015.1103126CrossRef

Ferreira, M.A., Matos, P.: The colors of investors’ money: the role of institutional investors around the world. J. Financ. Econ. 88(3), 499–533 (2008). https://doi.org/10.1016/j.jfineco.2007.07.003CrossRef

Ferreira, M.A., Matos, P., Pereira, J.P., Pires, P.: Do locals know better? A comparison of the performance of local and foreign institutional investors. J. Bank. Finance 82, 151–164 (2017). https://doi.org/10.1016/j.jbankfin.2017.06.002CrossRef

Gu, X., An, Z., Chen, C., Li, D.: Do foreign institutional investors monitor opportunistic managerial behaviour? Evidence from real earnings management. Account. Finance (2022). https://doi.org/10.1111/acfi.13015CrossRef

Gu, X., An, Z., Chen, C., Li, D.: Do foreign institutional investors monitor opportunistic managerial behaviour? Evidence from real earnings management. Account. Finance 63(1), 317–351 (2023). https://doi.org/10.1111/acfi.13015CrossRef

Gul, F.A., Kim, J.-B., Qiu, A.A.: Ownership concentration, foreign shareholding, audit quality, and stock price synchronicity: evidence from China. J. Financ. Econ. 95(3), 425–442 (2010). https://doi.org/10.1016/j.jfineco.2009.11.005CrossRef

Hasan, I., Song, L., Wachtel, P.: Institutional development and stock price synchronicity: evidence from China. J. Comp. Econ. 42(1), 92–108 (2014)CrossRef

Henry, T.R., Koski, J.L.: Ex-dividend profitability and institutional trading skill. J. Financ. 72(1), 461–494 (2017). https://doi.org/10.1111/jofi.12472CrossRef

Hsu, M.-F., Wang, K.: The level and stability of institutional ownership and firm performance: evidence from Taiwan. Emerg. Mark. Financ. Trade 50(sup2), 159–173 (2014). https://doi.org/10.2753/REE1540-496X5002S211CrossRef

Huang, R.D., Shiu, C.-Y.: Local effects of foreign ownership in an emerging financial market: evidence from qualified foreign institutional investors in Taiwan. Financ. Manag. 38(3), 567–602 (2009). https://doi.org/10.1111/j.1755-053X.2009.01048.xCrossRef

Huang, H.-G., Tsai, W.-C., Weng, P.-S., Wu, M.-H.: Volatility of order imbalance of institutional traders and expected asset returns: evidence from Taiwan. J. Financ. Mark. 52, 100546 (2021). https://doi.org/10.1016/j.finmar.2020.100546CrossRef

Jeon, J.Q., Ryoo, J.: How do foreign investors affect corporate policy?: Evidence from Korea. Int. Rev. Econ. Financ. 25, 52–65 (2013). https://doi.org/10.1016/j.iref.2012.05.001CrossRef

Kacperczyk, M., Sundaresan, S., Wang, T.: Do foreign institutional investors improve price efficiency? Rev. Financ. Stud. 34(3), 1317–1367 (2020). https://doi.org/10.1093/rfs/hhaa076%JTheReviewofFinancialStudiesCrossRef

Kim, J.-B., Yi, C.H.: Foreign versus domestic institutional investors in emerging markets: who contributes more to firm-specific information flow? China J. Account. Res. 8(1), 1–23 (2015). https://doi.org/10.1016/j.cjar.2015.01.001CrossRef

Kim, I., Miller, S., Wan, H., Wang, B.: Drivers behind the monitoring effectiveness of global institutional investors: evidence from earnings management. J. Corp. Financ. 40, 24–46 (2016). https://doi.org/10.1016/j.jcorpfin.2016.06.006CrossRef

Kim, J.-B., Li, X., Luo, Y., Wang, K.: Foreign investors, external monitoring, and stock price crash risk. J. Acc. Audit. Financ. 35(4), 829–853 (2020)

Kun, L., Yu, L., Hu, X. (2018). The impact of institutional investors on stock price synchronicity: evidence from the shanghai stock market. In: Proceedings of the Eleventh International Conference on Management Science and Engineering Management (vol 11, pp. 1548–1558). Springer International Publishing

La Porta, R., Lopez-de-Silanes, F., Shleifer, A., Vishny, R.: The quality of government. J. Law Econ. Organ. 15(1), 222–279 (1999). https://doi.org/10.1093/jleo/15.1.222CrossRef

La Porta, R., Lopez-De-Silanes, F., Shleifer, A., Vishny, R.: Investor protection and corporate valuation. J. Financ. 57(3), 1147–1170 (2002). https://doi.org/10.1111/1540-6261.00457CrossRef

Lee, Y.-T., Liu, Y.-J., Roll, R., Subrahmanyam, A.: Order imbalances and market efficiency: evidence from the Taiwan stock exchange. J. Financ. Quant. Anal. 39(2), 327–341 (2004). https://doi.org/10.1017/S0022109000003094CrossRef

Lel, U.: The role of foreign institutional investors in restraining earnings management activities across countries. J. Int. Bus. Stud. 50(6), 895–922 (2019). https://doi.org/10.1057/s41267-018-0195-zCrossRef

Li, Y., Han, M., Faff, R., Zhang, H.: Foreign ownership and stock liquidity uncertainty. J. Int. Finan. Markets Inst. Money 81, 101673 (2022)CrossRef

Liang, J.-W., Lin, M.-F., Chin, C.-L.: Does foreign institutional ownership motivate firms in an emerging market to increase voluntary disclosure? Evidence from Taiwan. Rev. Quant. Financ. Acc. 39(1), 55–76 (2012). https://doi.org/10.1007/s11156-011-0245-0CrossRef

Lien, D., Hung, P.-H.: Whose trades contribute more to price discovery? Evidence from the Taiwan stock exchange. Rev. Quant. Finance Account. 8, 9 (2023). https://doi.org/10.1007/s11156-023-01150-7CrossRef

Lin, F., Wu, C.M., Fang, T.Y., Wun, J.C.: The relations among accounting conservatism, institutional investors and earnings manipulation. Econ. Model. 37, 164–174 (2014)CrossRef

Lin, Y., Lee, L.-C., Chi, T.-L., Lo, C.-C., Chung, W.-S.: The determinants of the stock price performance of analyst recommendations. Asian Soc. Sci. 15(11), 25 (2019)CrossRefADS

Liu, C., Chung, C.Y., Sul, H.K., Wang, K.: Does hometown advantage matter? The case of institutional blockholder monitoring on earnings management in Korea. J. Int. Bus. Stud. 49(2), 196–221 (2018). https://doi.org/10.1057/s41267-017-0093-9CrossRef

Lou, K.-R., Lu, Y.-K., Shiu, C.-Y.: Monitoring role of institutional investors and acquisition performance: evidence from East Asian markets. Pac. Basin Financ. J. 59, 101244 (2020). https://doi.org/10.1016/j.pacfin.2019.101244CrossRef

Morck, R., Yeung, B., Yu, W.: The information content of stock markets: why do emerging markets have synchronous stock price movements? J. Financ. Econ. 58(1), 215–260 (2000). https://doi.org/10.1016/S0304-405X(00)00071-4CrossRef

Park, H.-Y., Chae, S.-J., Cho, M.-K.: Controlling shareholders’ ownership structure, foreign investors’ monitoring, and investment efficiency. Invest. Manag. Financ. Innov. 13(3), 159–170 (2016)

Piotroski, J.D., Roulstone, D.T.: The influence of analysts, institutional investors, and insiders on the incorporation of market, industry, and firm-specific information into stock prices. Account Rev 79(4), 1119–1151 (2004)CrossRef

Shen, H., Liu, R., Xiong, H., Hou, F., Tang, X.: Economic policy uncertainty and stock price synchronicity: Evidence from China. Pac-Basin Finan. J. 65, 101485 (2021)CrossRef

Shu, P.-G., Chiang, S.-J.: The impact of corporate governance on corporate social performance: cases from listed firms in Taiwan. Pac. Basin Financ. J. 61, 101332 (2020). https://doi.org/10.1016/j.pacfin.2020.101332CrossRef

Su, K., Zhang, M., Liu, C.: Financial derivatives, analyst forecasts, and stock price synchronicity: evidence from an emerging market. J. Int. Finan. Mark. Inst. Money 81, 101671 (2022). https://doi.org/10.1016/j.intfin.2022.101671CrossRef

Tee, C.M.: Political connections, institutional investors monitoring and stock price synchronicity. Manag. Financ. 43(11), 1236–1253 (2017). https://doi.org/10.1108/MF-03-2017-0099MathSciNetCrossRef

Tsang, A., Xie, F., Xin, X.: Foreign institutional investors and corporate voluntary disclosure around the world. Account. Rev. 94(5), 319–348 (2019). https://doi.org/10.2308/accr-52353%JTheAccountingReviewCrossRef

Utz, S.: Over-investment or risk mitigation? Corporate social responsibility in Asia-Pacific, Europe, Japan, and the United States. Rev. Financ. Econ. (2017). https://doi.org/10.1016/j.rfe.2017.10.001CrossRef

Wu, T.-C., Huang, H.-H., Wang, C.-P., Zhong, Y.-L.: The influences of book-to-price ratio and stock capitalization on value-at-risk estimation in Taiwan stock market. Emerg. Mark. Financ. Trade 56(5), 1055–1072 (2020). https://doi.org/10.1080/1540496X.2018.1509790CrossRef

Xing, X., Anderson, R.: Stock price synchronicity and public firm-specific information. J. Financ. Mark. 14(2), 259–276 (2011). https://doi.org/10.1016/j.finmar.2010.10.001CrossRef

Titel: Foreign versus domestic institutional ownership and stock price synchronicity in Taiwan
verfasst von: Pi-Yun Yang
Dun-Yao Ke
Kai-Chien Chen
Thi Bao Ngoc Nguyen
Publikationsdatum: 16.02.2024
Verlag: Springer US
Erschienen in: Financial Markets and Portfolio Management
Print ISSN: 1934-4554
Elektronische ISSN: 2373-8529
DOI: https://doi.org/10.1007/s11408-023-00441-2