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Does foreign institutional ownership matter for stock price synchronicity? International evidence

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  • Dang, Tung Lam
  • Vo, Thi Thuy Anh
  • Vo, Xuan Vinh
  • Thi My Nguyen, Linh

Abstract

We investigate the relation between foreign institutional ownership and stock price synchronicity, and whether this relation varies across country-level institutional and information infrastructures. Using a comprehensive dataset for firms across 40 countries over the period between 2000 and 2016, we document the following notable findings. First, foreign institutional ownership is negatively associated with stock price synchronicity. Second, we find that improved information transparency is a possible channel underlying the effect of foreign institutional ownership on stock price synchronicity. In addition, the synchronicity-reducing effect of foreign institutional ownership is more pronounced for firms in countries with weaker institutional infrastructures. Finally, our results reveal different impacts of foreign institutional ownership on stock price synchronicity across various types of foreign institutional ownership, highlighting the importance of foreign investor heterogeneity in improving firm information environment.

Suggested Citation

  • Dang, Tung Lam & Vo, Thi Thuy Anh & Vo, Xuan Vinh & Thi My Nguyen, Linh, 2023. "Does foreign institutional ownership matter for stock price synchronicity? International evidence," Journal of Multinational Financial Management, Elsevier, vol. 67(C).
    • Handle: RePEc:eee:mulfin:v:67:y:2023:i:c:s1042444x23000026
    DOI: 10.1016/j.mulfin.2023.100783
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    2. Barka, Zeineb & Benkraiem, Ramzi & Hamza, Taher & Lakhal, Faten & Vigne, Samuel, 2023. "Institutional investor horizon and stock price synchronicity: Do product market competition and analyst coverage matter?," International Review of Financial Analysis, Elsevier, vol. 89(C).

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    More about this item

    Keywords

    Foreign institutional ownership; Stock price synchronicity; Information environments; Institutional characteristics;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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