FIRM LEVEL DETERMINANTS OF FOREIGN PORTFOLIO INVESTMENTS IN TURKEY: A DYNAMIC PANEL REGRESSION ANALYSIS APPROACH

The main aim of this study is to identify the investment preferences of foreign portfolio investors in Turkey. In this study, which comprises 151 non-financial firms listed in Borsa Istanbul between the years 2005-2014 and 1510 firm-year observations, dynamic panel regression methods are used to account for the consistent structure of the foreign investors’ preferences over years. The findings of the study indicate that the market size is the most important determinant of the foreign investment decisions. In addition to the market size, foreign investors prefer firms with low level of liquidity. We do not observe any consistent and significant relationship between foreign investment ratio and other firm specific determinants. The findings of this study is consistent with the other similar studies in the literature. It is believed that due to asymmetric information problem between the local and foreign investors, foreign investors tend to invest in firms that they have more information about.