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Equity home bias and corporate disclosure

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  • Eichler, Stefan

Abstract

I show that more comprehensive corporate disclosure reduces investors’ uncertainty about domestic companies’ payoffs at no cost, thereby decreasing investors’ equity home bias toward a country. Since investors should base their investment decisions on valid and easily interpretable company information only, more comprehensive disclosure will reduce the home bias only if domestic securities law is sufficiently stratified and domestic companies use international accounting standards. Using panel data for 38 countries from 2003 to 2008 I find that more comprehensive disclosure reduces investors’ home bias, though significantly only for countries that sufficiently enforce their securities law and implement international accounting standards.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of International Money and Finance.

Volume (Year): 31 (2012)
Issue (Month): 5 ()
Pages: 1008-1032

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Handle: RePEc:eee:jimfin:v:31:y:2012:i:5:p:1008-1032

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Web page: http://www.elsevier.com/locate/inca/30443

Related research

Keywords: Corporate disclosure; Equity home bias; Portfolio allocation;

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References

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Cited by:
  1. Hamberg, Mattias & Mavruk, Taylan & Sjögren, Stefan, 2013. "Investment allocation decisions, home bias and the mandatory IFRS adoption," Journal of International Money and Finance, Elsevier, vol. 36(C), pages 107-130.

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