Do foreign institutional investors stabilize the capital market?

Han, Liyan; Zheng, Qingqing; Li, Lei; Yin, Libo

doi:10.1016/j.econlet.2015.09.008

Cited by 25 publications

(15 citation statements)

References 8 publications

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“…The coefficient of the VO was negative and statistically significant at 1% level (P <0.01). The results of this study on the relation between foreign ownership and volatility are the same as those of Kang & Stulz (1997), Lilzebolm & Loflund (2005, and Han et al (2015). This means that foreign investors prefer the firms with low volatility in the Korean stock market.…”

Section: Regression Resultssupporting

confidence: 62%

“…One is the investment barrier associated with dividend yield, liquidity, size and profitability, and the other is profitability or risk related factors. Han et al (2015) investigated the impact of financial liberalization on China's emerging capital markets. They examined that foreign institutional investors reduce volatility and act as market stabilizers.…”

Section: ⅱ Literature Reviewmentioning

confidence: 99%

“…There are also studies that analyze the characteristics of firms preferred by foreign investors. They focus on the relation between foreign ownership and firm characteristics (Kang & Stulz, 1997;Dahlquist & Robertsson, 2001;Lin & Shiu, 2003;Lilzebolm & Loflund, 2005;Han, Zheng, Li, & Yin, 2015). The results of the analysis showed that foreign investors prefer large, low risk, low leverage, and high cash holdings firms.…”

Section: ⅰ Introductionmentioning

confidence: 99%

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Is Blockholder Dispersion Attracting Foreign Investors?

Kim¹,

Cho²

2018

Glob Bus Financ Rev

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This paper examines the impact of blockholder dispersion on the foreign ownership in the Korean stock market over the period 2005-2016. We use the Herfindahl Index as a substitute variable for blockholder dispersion. Results show that a lower Herfindahl Index leads to a higher foreign ownership of the publicly listed companies in Korea. This implies that foreign investors prefer companies with dispersed ownership. We confirmed that foreign investors also preferred firms with low volatility, small dividend yields, large, low leverage, and high accounting performance. We have also found that the behavior of foreign investors is different before and after global financial risk. Our findings contribute to our understanding regarding to the relation between foreign investors and ownership dispersion in Korean stock markets.

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Section: Regression Resultssupporting

confidence: 62%

Section: ⅱ Literature Reviewmentioning

confidence: 99%

Section: ⅰ Introductionmentioning

confidence: 99%

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Is Blockholder Dispersion Attracting Foreign Investors?

Kim¹,

Cho²

2018

Glob Bus Financ Rev

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“…Li and Wang (2010) report a significantly negative relationship between institutional net trading and China's market volatility. Han et al (2015) document that the FIIs reduce market volatility and stabilize the market, whereas the domestic institutional investors induce market volatility in China. Umutlu and Shackleton (2015) examine different Korean market investors' stock return volatility and trading styles.…”

Section: Review Of Related Literaturementioning

confidence: 99%

Institutional investment activities and stock market volatility amid COVID-19 in India

Naik

Shaikh

Huynh

2021

Economic Research-Ekonomska Istraživanja

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This article examines institutional investors' investment activities and the impact of their trading styles on market volatility amidst COVID-19 in India. Specifically, it seeks to offer a comprehensive analysis of foreign portfolio investors' (FPIs) and domestic mutual fund managers' (MFs) investment on equity and debt securities. It examines whether their trading activities drive market volatility during the pandemic period. Also, it explores the impact of COVID-19 on the Indian equity market. This study finds that the growth of COVID-19 does not significantly affect the stock market volatility during the study period. Precisely, the findings reveal that the FPI's net selling of equity and their overall trading activities in the debt instruments positively impact the market volatility. Findings also show that the FPI's momentum buys and contrarian sales induce market volatility, whereas the MF's trading style does not significantly influence the volatility. The Granger causality tests indicate that the FPI's net sales of equity instruments cause the return volatility and that the market volatility does not drive the equity net sales. Findings also reveal that mutual-fund managers' trading behavior does not Granger cause market volatility; instead, volatility causes MF's net selling of debt instruments.

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“…Furthermore, Bohl and Brzeszczy nski (2006) found that the domestic institutional investors (DIIs) help to reduce the stock market volatility because they have favor in investment strategy and information collection. However, Han et al (2015) found that foreign institutional investors reduce volatility and act as market stabilizers.…”

Section: Domestic Institutional Ownershipmentioning

confidence: 99%

Does domestic institutional ownership increase return volatility? The French context

Aloui¹,

Jarboui

2019

IJLMA

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Purpose The purpose of this study is to examine the impact of domestic ownership on the stock return volatility. The authors use a detailed panel data set of 89 French companies listed on the SBF 120 over the period 2006-2013. The empirical results show that the domestic institutional investors have low stock price volatility in the French stock market. This result implies the stabilizing factor of domestic investors in France stock markets, which can be considered as one of the potential favor of growing the exhibition of domestic stock markets to institutional investors. This study employs a variety of econometric models, including feedbacks, to test the robustness of our empirical results. Design/methodology/approach To explain the relation between stock return volatility and domestic institutional investors (DIIs), the authors used two complementary methods: two-step generalized method of moments analysis as well as panel vector autoregressive framework and two-stage least squares (2SLS) method. Findings The authors’ empirical results show that the proportion of DIIs with advanced local degrees stabilizes the stock price volatility. However, firm’s size and the turnover have a positive effect on the volatility of the stock returns. This result is consistent with the hypothesis that the firm’s size and the turnover will increase price volatility during a financial crisis as a result of the deterioration of the monitoring mechanism and the reduction of the investors’ confidence in firms. Originality/value This result also indicates that the variables (the firm’s size, total sales and debt ratio) are poor corporate governance and have a role in the increased the stock return volatility.

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Do foreign institutional investors stabilize the capital market?

Cited by 25 publications

References 8 publications

Is Blockholder Dispersion Attracting Foreign Investors?

Is Blockholder Dispersion Attracting Foreign Investors?

Institutional investment activities and stock market volatility amid COVID-19 in India

Does domestic institutional ownership increase return volatility? The French context

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