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Does Board Diversity Attract Foreign Institutional Ownership? Insights from the Chinese Equity Market

Author

Listed:
  • Shoukat Ali

    (Lahore Business School, The University of Lahore, Lahore 54000, Pakistan
    Department of Commerce, The Islamia University of Bahawalpur, Bahawalpur 63100, Pakistan)

  • Ramiz Ur Rehman

    (Lahore Business School, The University of Lahore, Lahore 54000, Pakistan
    Faculty of Business, Sohar University, Sohar 311, Oman)

  • Muhammad Ishfaq Ahmad

    (Lahore Business School, The University of Lahore, Lahore 54000, Pakistan)

  • Joe Ueng

    (Economics and Finance, Cameron School of Business, The University of St. Thomas, Houston, TX 77006, USA)

Abstract

The study aimed to empirically investigate the impact of board diversity variables (age, gender, nationality, education, tenure, and expertise) on the investment preferences of foreign institutional investors in an emerging market, China. For this, sample data consisted of 1374 nonfinancial Chinese firms from 2009 to 2018. The study used OLS regression as a baseline regression, a fixed effect model to control omitted variable bias, and the two-step systems GMM model to control the endogeneity problem. The study revealed that board diversity variables (gender, nationality, education, and financial expertise) are positively associated with foreign institutional ownership in Chinese nonfinancial firms, implying that foreign institutional investors own a high percentage of Chinese nonfinancial firms with diversity of gender, nationality, education, and financial expertise. Age and tenure of board diversity, on the other hand, have little correlation with foreign institutional ownership. Further, the robustness regressions also confirmed the relationship between board diversity and foreign institutional ownership. This study made a unique attempt to provide empirical evidence that firms having diverse boards attract foreign institutional ownership by reducing asymmetric information.

Suggested Citation

  • Shoukat Ali & Ramiz Ur Rehman & Muhammad Ishfaq Ahmad & Joe Ueng, 2021. "Does Board Diversity Attract Foreign Institutional Ownership? Insights from the Chinese Equity Market," JRFM, MDPI, vol. 14(11), pages 1-15, October.
    • Handle: RePEc:gam:jjrfmx:v:14:y:2021:i:11:p:507-:d:661495
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