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Stock price spillovers from foreign institutional investor divestment: Evidence from BlackRock's closure of the China Flexible Equity Fund

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  • Pan, Changchun
  • Song, Yuhang
  • Jin, Long

Abstract

This study investigates the impact of BlackRock's September 7, 2023, announcement to close the China Flexible Equity fund on Chinese A-share listed firms held by foreign institutional investors (FIIs). Using event study methodology, we find that the cumulative abnormal return (CAR) of these firms significantly decreases around the announcement date. The decline is attributed to investor concerns about the absence of original governance structures and pessimistic sentiments driven by representativeness bias. The effect is more pronounced in firms with overseas business, weaker investor protection, and overvalued stocks. Our findings provide insights into the influence of FIIs on capital market stability amid global financial movements.

Suggested Citation

  • Pan, Changchun & Song, Yuhang & Jin, Long, 2024. "Stock price spillovers from foreign institutional investor divestment: Evidence from BlackRock's closure of the China Flexible Equity Fund," International Review of Financial Analysis, Elsevier, vol. 96(PB).
    • Handle: RePEc:eee:finana:v:96:y:2024:i:pb:s1057521924006264
    DOI: 10.1016/j.irfa.2024.103694
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