Copyfrom:Dept. of Accounting Time:2021-06-11
Theme:Resolve the Global Risk-Related Agency Conflict: Evidence from U.S. Foreign Institutional Investors
Speaker:Li Donghui,Shenzhen University, School of Economics, Distinguished Professor
Time:2021-06-11 10:00
Address:Room 1008, Mingde Business Building
Language:Chinese
ABSTRACT:
Based on a large non-U.S. sample, we document that the negative relation between firm investment and idiosyncratic risk (i.e., investment-idiosyncratic risk sensitivity) is significantly alleviated by U.S. foreign institutional investors (FIIs) but not by non-U.S. FIIs or domestic institutional investors. It indicates that U.S. FIIs can mitigate the risk-related agency conflict in global capital market. Our results are robust to various endogeneity tests, including DiD estimations based on the addition of a stock to the MSCI ACWI and the passage of JGTRRA in 2003. We further explore two possible economic channels through which U.S. FIIs affect the response of firm investment to idiosyncratic risk: the risk-tolerance channel and the monitoring channel. Last, we show that the investment spurred by U.S. FIIs is positively correlated with firm valuation and performance as well as economic development at the country level, highlighting the important role of U.S. FIIs in facilitating economic growth in non-U.S. economies.
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