Foreign Institutional Investors and Corporate Voluntary Disclosure around the World

59 Pages Posted: 6 Dec 2013 Last revised: 14 Mar 2020

See all articles by Albert Tsang

Albert Tsang

Hong Kong Polytechnic University

Fei Xie

University of Delaware - Lerner College of Business and Economics; European Corporate Governance Institute (ECGI)

Xiangang Xin

City University of Hong Kong

Date Written: July 25, 2018

Abstract

We examine the impact of foreign institutional investors on firms’ voluntary disclosure practices measured by management forecasts. In a sample of 32 non-U.S. countries, we find that, on average, foreign institutional investments lead to improved voluntary disclosure and their impact is larger than that of domestic institutional investors. These results are more pronounced when foreign institutional investors (i) are unfamiliar with the firm’s home country, (ii) have longer investment horizons, and (iii) are from countries with stronger investor protection and disclosure requirements than the firm’s home country. However, we also find some evidence of voluntary disclosure deterioration in firms with foreign institutional investors from countries with inferior disclosure requirements and securities regulations and with concentrated foreign institutional ownership. Overall, our results suggest that the relation between foreign institutional investors and voluntary disclosure is much richer and more complex than what has been documented for domestic institutional investors in the literature.

Keywords: Foreign institutional investors, corporate information environment, corporate disclosure, management forecasts, country-level corporation governance

JEL Classification: G23, G32, G14

Suggested Citation

Tsang, Albert and Xie, Fei and Xin, Xiangang, Foreign Institutional Investors and Corporate Voluntary Disclosure around the World (July 25, 2018). The Accounting Review 94(5), 319-348, Available at SSRN: https://ssrn.com/abstract=2363504 or http://dx.doi.org/10.2139/ssrn.2363504

Albert Tsang

Hong Kong Polytechnic University ( email )

11 Yuk Choi Rd
Hung Hom
Hong Kong

Fei Xie (Contact Author)

University of Delaware - Lerner College of Business and Economics ( email )

42 Amstel Ave
Newark, DE 19716
United States
(302) 8313811 (Phone)

HOME PAGE: http://sites.google.com/site/feisresearch/

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Xiangang Xin

City University of Hong Kong ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong
Hong Kong

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