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Stock market liberalization, foreign institutional investors, and informational efficiency of stock prices: Evidence from an emerging market
Author(s) -
Li Yijie,
Liu Jianghui,
Wang Haizhi,
Wang Peng
Publication year - 2021
Publication title -
international journal of finance and economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.505
H-Index - 39
eISSN - 1099-1158
pISSN - 1076-9307
DOI - 10.1002/ijfe.2074
Subject(s) - stock market , stock (firearms) , monetary economics , incentive , business , foreign ownership , institutional investor , economics , market efficiency , financial economics , finance , foreign direct investment , microeconomics , corporate governance , macroeconomics , mechanical engineering , paleontology , horse , engineering , biology
This study investigates the effects of investments by qualified foreign institutional investors (QFIIs) on the informational efficiency of stock prices in Chinese A‐share stock markets. Employing a large sample of listed firms from 2004 to 2012, we document a significant and positive relationship between stock price informativeness and stock ownership by foreign institutional investors. We also use the instrument‐variable approach, propensity‐score matching method, as well as an alternative measure of informational efficiency to ensure the robustness of our findings. We document that the effects of foreign ownership on informational efficiency is stronger for firms with lower levels of assets intangibility and in regions with less developed institutions. In addition, we document that the effects of foreign ownership on informational efficiency is more pronounced when QFIIs have better local information and more incentives to monitor.