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Investor Protection and the Role of Firm-Level Financial Transparency in Attracting Foreign Investment

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  • Bowe Hansen
  • Mihail K. Miletkov
  • M. Babajide Wintoki

Abstract

We ask if companies can attract foreign equity capital by improving the transparency of their financial statements. Using a large panel of firms across 51 countries outside the United States, we show that the answer is yes, but only in countries with relatively high levels of investor protection. In countries with poor investor protection, unilaterally increasing firm-level transparency has no effect on foreign ownership. Furthermore, our results indicate that in countries with higher levels of investor protection, the positive association between transparency and foreign ownership is stronger following a country's adoption of the International Financial Reporting Standards.

Suggested Citation

  • Bowe Hansen & Mihail K. Miletkov & M. Babajide Wintoki, 2015. "Investor Protection and the Role of Firm-Level Financial Transparency in Attracting Foreign Investment," The Financial Review, Eastern Finance Association, vol. 50(3), pages 393-434, August.
    • Handle: RePEc:bla:finrev:v:50:y:2015:i:3:p:393-434
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    File URL: http://hdl.handle.net/10.1111/fire.12072
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    Citations

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    Cited by:

    1. Wenjing Li & Jeff Ng & Albert Tsang & Oktay Urcan, 2019. "Country-level institutions and management earnings forecasts," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 50(1), pages 48-82, February.
    2. Xu Cheng & Dongmin Kong & Xinwei Zheng & Qi Tang, 2022. "Do foreign investors crowd out sell‐side analysts? Evidence from China," The Financial Review, Eastern Finance Association, vol. 57(4), pages 815-834, November.
    3. Baig, Ahmed & DeLisle, R. Jared & Zaynutdinova, Gulnara R., 2022. "Index mutual fund ownership and financial reporting quality," Research in International Business and Finance, Elsevier, vol. 62(C).
    4. Liu, Chengcheng & Li, Qing & Lin, Yu-En, 2023. "Corporate transparency and firm value: Does market competition play an external governance role?," Journal of Contemporary Accounting and Economics, Elsevier, vol. 19(1).
    5. Ater, Brandon & Hansen, Bowe, 2021. "Do the specific countries in which a multinational corporation operates affect its private loan contracts?," Journal of Multinational Financial Management, Elsevier, vol. 62(C).

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