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Foreign Ties That Bind: Cross-Border Firm Expansions and Fund Portfolio Allocation Around the World

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  • Moshirian, Fariborz
  • Pham, Peter K.
  • Tian, Shu
  • Wu, Eliza

Abstract

We investigate whether international operations enhance information links between firms and foreign investors. Exploiting novel subsidiary-level data and within-location variations, we show that, after expanding into another country, a firm attracts greater investment allocation from funds from that country than from other foreign funds. This increase is economically significant, equivalent to one-fifth of the average firm weight in a country-specific portfolio. The observed effect cannot be attributed to funds’ influence, persists even when funds are already familiar with the firm, and helps them generate superior risk-adjusted returns. Our results suggest that firms’ cross-border economic activities contribute to global financial interconnectedness.

Suggested Citation

  • Moshirian, Fariborz & Pham, Peter K. & Tian, Shu & Wu, Eliza, 2023. "Foreign Ties That Bind: Cross-Border Firm Expansions and Fund Portfolio Allocation Around the World," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 58(4), pages 1768-1807, June.
    • Handle: RePEc:cup:jfinqa:v:58:y:2023:i:4:p:1768-1807_12
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