Large foreign ownership and stock price informativeness around the world

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 fi...

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Bibliographic Details
Published inJournal of international money and finance Vol. 36; pp. 211 - 230
Main Authors He, Wen, Li, Donghui, Shen, Jianfeng, Zhang, Bohui
Format Journal Article
LanguageEnglish
Published Kidlington Elsevier Ltd 01.09.2013
Elsevier Science Ltd
Subjects
Business ownership
Earnings
Enterprises
Foreign ownership
International financial market
International markets
Large foreign ownership (LFO)
Price non-synchronicity (NONSYNC)
Probability
Probability of informed trading (PIN)
Rates of return
Stock price informativeness
Stock prices
Stock returns
Studies
Trade
Stock price informativeness
Probability of informed trading (PIN)
O16
G15
International financial market
Large foreign ownership (LFO)
Price non-synchronicity (NONSYNC)
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Summary: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.
Bibliography:ObjectType-Article-2
SourceType-Scholarly Journals-1
ObjectType-Feature-1
content type line 23
ISSN:0261-5606
1873-0639
DOI:10.1016/j.jimonfin.2013.04.002