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Do domestic or foreign institutional investors matter? The case of firm information asymmetry in Korea

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  • Chung, Chune Young
  • Kim, Hyeik
  • Wang, Kainan

Abstract

We examine the impact of institutional investors on the effectiveness of firms' governance in Korea, as evidenced by information asymmetry. We find that lagged institutional blockholdings are negatively related to future information asymmetry measures, primarily through long-term, domestic institutions. We attribute this finding to domestic institutions' proximity advantages in local markets. Our findings imply that policy initiatives aiming to resolve firm-level agency issues in emerging markets may maximize their effectiveness by promoting the active participation of domestic institutions.

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  • Chung, Chune Young & Kim, Hyeik & Wang, Kainan, 2022. "Do domestic or foreign institutional investors matter? The case of firm information asymmetry in Korea," Pacific-Basin Finance Journal, Elsevier, vol. 72(C).
    • Handle: RePEc:eee:pacfin:v:72:y:2022:i:c:s0927538x22000221
    DOI: 10.1016/j.pacfin.2022.101727
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    More about this item

    Keywords

    Institutional blockholding; Information asymmetry; Corporate governance; Korean stock market; Chaebol; Agency problem;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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