Large foreign ownership and stock price informativeness around the world

Wen He; Donghui Li; Jianfeng Shen; Bohui Zhang

doi:10.1016/j.jimonfin.2013.04.002

Large foreign ownership and stock price informativeness around the world

Wen He, Donghui Li, Jianfeng Shen, Bohui Zhang

Research output: Contribution to journal › Article › Research › peer-review

63 Citations (Scopus)

Abstract

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.

Original language	English
Pages (from-to)	211-230
Number of pages	20
Journal	Journal of International Money and Finance
Volume	36
DOIs	https://doi.org/10.1016/j.jimonfin.2013.04.002
Publication status	Published - Sept 2013
Externally published	Yes

Keywords

International financial market
Large foreign ownership (LFO)
Price non-synchronicity (NONSYNC)
Probability of informed trading (PIN)
Stock price informativeness

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10.1016/j.jimonfin.2013.04.002

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title = "Large foreign ownership and stock price informativeness around the world",

abstract = "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.",

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AB - 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.

KW - International financial market

KW - Large foreign ownership (LFO)

KW - Price non-synchronicity (NONSYNC)

KW - Probability of informed trading (PIN)

KW - Stock price informativeness

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VL - 36

SP - 211

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JO - Journal of International Money and Finance

JF - Journal of International Money and Finance

ER -

Large foreign ownership and stock price informativeness around the world

Abstract

Keywords

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