Governance, Monitoring and Foreign Investment in Chinese Companies
18 Pages Posted: 15 Nov 2009 Last revised: 6 Aug 2011
Date Written: November 13, 2009
This paper examines corporate governance and foreign equity home bias in Chinese companies. Free float measures are employed to account for bias introduced by insider control. It is found that foreign ownership relative to free float is negatively impacted by legal persons (large domestic cross company) holdings and positively related to large foreign institutional holdings, with the implication that the latter provide a monitoring function that reduces agency problems. Foreign ownership relative to free float is negatively related to firm size, possibly due to quasi overnment being the primary influence over insider control.
Keywords: Home bias, Monitors, Foreign ownership, Chinese stock market
JEL Classification: G1, G11, G15
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