Foreign Ownership and Information Asymmetry1. (18th April 2013)

• Record Type: Journal Article
• Authors: Choi, Jongmoo Jay; Lam, Kevin C. K.; Sami, Heibatollah; Zhou, Haiyan
• Is Part Of: Asia-Pacific journal of financial studies. Volume 42:Number 2(2013:Apr.)
• Page Start: 141
• Page End: 166
• Publication Date: 2013-04-18
• Subjects: Pacific Area -- Economic conditions -- Periodicals; Finance -- Asia -- Periodicals; Finance -- Pacific Area -- Periodicals; Asia -- Economic conditions -- Periodicals; 332.09505
• DOI: 10.1111/ajfs.12010
• Languages: English
• ISSNs: 2041-9945

Abstract

<abstract abstract-type="main" xml:lang="en" id="ajfs12010-abs-0001"> <title>Abstract</title> <p>Foreign ownership has two competing effects on information asymmetry. Short term investment horizon, superior information processing capability, controlling positions, and increased agency costs associated with foreign ownership increases information asymmetry, while demand for more disclosure, better accounting and auditing standards, use of international auditors, incentive alignments, long term investment horizon and greater monitoring decreases information asymmetry. In this article, we examine and find a significant and positive impact of foreign ownership on information asymmetry measured by bid‐ask spread in China. On balance, foreign equity investors tend to enhance their informational advantages more than improving the general informational environments in local markets. These results have implications for transparency and disclosure policies as well as privatization in emerging markets.</p> </abstract>