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Large foreign ownership and stock price informativeness around the world

Author

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  • He, Wen
  • Li, Donghui
  • Shen, Jianfeng
  • Zhang, Bohui

Abstract

This study investigates the relation between large foreign ownership (LFO) and the informativeness of stock prices in 40 markets. We show that LFO is positively related to price informativeness, measured by probability of informed trading (PIN) and price non-synchronicity (NONSYNC) which reflects firm-specific variations in stock returns. We also find a stronger association between stock returns and future earnings innovations for firms with higher LFO. Further analysis reveals that the effect of LFO on price informativeness is stronger in developed economies and markets with strong investor protection and a transparent information environment.

Suggested Citation

  • He, Wen & Li, Donghui & Shen, Jianfeng & Zhang, Bohui, 2013. "Large foreign ownership and stock price informativeness around the world," Journal of International Money and Finance, Elsevier, vol. 36(C), pages 211-230.
    • Handle: RePEc:eee:jimfin:v:36:y:2013:i:c:p:211-230
    DOI: 10.1016/j.jimonfin.2013.04.002
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    More about this item

    Keywords

    International financial market; Large foreign ownership (LFO); Stock price informativeness; Probability of informed trading (PIN); Price non-synchronicity (NONSYNC);
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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