Country funds and asymmetric information

Frankel, Jeffrey A.; Schmukler, Sergio L.

doi:10.1002/1099-1158(200007)5:3<177::aid-ijfe131>3.3.co;2-4

Cited by 16 publications

(3 citation statements)

References 21 publications

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“…This disadvantage is amplified by market segmentation and geographical distance (K. Chan, Covrig, & Ng, 2005; Frankel & Schmukler, 2000; Froot & Ramadorai, 2008).…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

“…Global capital markets are segmented, to some extent, due to a variety of market imperfections (e.g., Foerster & Karolyi, 1999). The consequence of such market segmentation is that the less accessible foreign markets tend to be underresearched and less regulated (Frankel & Schmukler, 2000). U.S. investors are therefore subject to additional information costs when tapping into these segmented markets.…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

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Earnings Opacity and Closed-End Country Fund Discounts

Chen

Hope

et al. 2016

Journal of Accounting, Auditing & Finance

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Closed-end country funds are interesting in that they have two sets of prices for the same underlying assets-the net asset value (NAV) of the fund holdings as measured using the underlying firms' stock prices in their home markets and the fund price at which the fund trades on a U.S. stock exchange. Utilizing the theoretical framework of information asymmetry in two separate markets for an identical asset, we find that the difference between the fund's NAV and its trading price (i.e., the fund discount) is positively associated with the earnings opacity of the underlying companies. Such a positive association is consistent with the notion that U.S. investors face higher information acquisition and processing costs when compared with local investors, and therefore earnings opacity exacerbates the information disadvantage of U.S. investors, leading to a larger fund discount. We further show that the positive relation varies predictably with U.S. investors' information acquisition and processing costs and with the extent to which host stock markets are segmented from the U.S. market. Specifically, we find that the positive relation between earnings opacity and fund discounts is weaker for those funds with more U.S. cross-listings in fund holdings, with underlying companies following financial reporting standards similar to U.S. standards, and with less segmented local markets.

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“…This disadvantage is amplified by market segmentation and geographical distance (K. Chan, Covrig, & Ng, 2005; Frankel & Schmukler, 2000; Froot & Ramadorai, 2008).…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

Earnings Opacity and Closed-End Country Fund Discounts

Chen

Hope

et al. 2016

Journal of Accounting, Auditing & Finance

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“…The analysis of country fund discounts before the Asian crisis in Frankel and Schmukler (1998) show that in the two Thai country fund discounts turned into premia by the end of 1996. From early-1997, the premia of these funds increased steadily.…”

Section: Countyfundsmentioning

confidence: 99%

Predicting Currency Fluctuations and Crises: Do Resident Firms Have an Informational Advantage?

Kaufmann¹,

Mehrez²,

Schmukler³

1999

Policy Research Working Papers

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Are Foreign Institutional Investors Good for Emerging Markets?

Frenkel

Menkhoff²

2004

World Economy

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Country funds and asymmetric information

Cited by 16 publications

References 21 publications

Earnings Opacity and Closed-End Country Fund Discounts

Earnings Opacity and Closed-End Country Fund Discounts

Predicting Currency Fluctuations and Crises: Do Resident Firms Have an Informational Advantage?

Are Foreign Institutional Investors Good for Emerging Markets?

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