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The value of clean hands: Public policy and international asset allocation

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  • Sercu, Piet
  • Vanpee, R
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    Abstract

    Despite of the intuitive idea that corporate governance and transparency are crucial for a country's international appeal, foreign portfolio investors appear to care first and foremost about transparency, predictability and honesty in governments. This is, at least, what our analysis of international portfolio holdings imply. Our estimates indicate that (i)a modest improvement of government corruption, economic policy transparency and especially institutional quality can trigger an economically substantial rise in foreign interest for the stocks of that country; and (ii) an amelioration in country-level governance variables creates signifficantly higher effects on foreign equity demand than an improvement in traditional macro economic policy indicators.

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    File URL: https://lirias.kuleuven.be/bitstream/123456789/120464/1/AFI_0704.pdf
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    Bibliographic Info

    Paper provided by Katholieke Universiteit Leuven in its series Open Access publications from Katholieke Universiteit Leuven with number urn:hdl:123456789/120464.

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    Date of creation: 2007
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    Handle: RePEc:ner:leuven:urn:hdl:123456789/120464

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    Web page: http://www.kuleuven.be

    Related research

    Keywords: Value; Public policy; Policy; International; Corporate governance; Governance; Country; Portfolio;

    References

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