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Foreign institutional investors, information asymmetries, and asset valuation in emerging markets

Yildiz, Y. (2021) Foreign institutional investors, information asymmetries, and asset valuation in emerging markets. Research in International Business and Finance, 56 . Article Number 101381. ISSN 0275-5319. (doi:10.1016/j.ribaf.2021.101381) (KAR id:100051)

Abstract

This study investigates the effects of information asymmetries and asset valuation model differences (investor heterogeneity) between foreign and domestic investors on their distinct portfolio holdings in an emerging market setting. I argue that information asymmetry and investor heterogeneity views significantly interact in explaining the different asset allocation decisions of foreign and domestic investors. Employing a large dataset from Turkey, the findings suggest that both information asymmetry and investor heterogeneity view play a key role in explaining the investment decisions of different investor groups. Specifically, different from domestic investors, foreign investors are more likely to invest in firms with a higher global market performance which supports the investor heterogeneity view. However, this relationship only holds for firms with high information asymmetries. The difference in valuation models between foreign and domestic investors converge when asymmetric information problems between these investor groups weaken. This study contributes to the international finance literature by providing a new explanation of why foreign and domestic investors invest in different assets.

Item Type: Article
DOI/Identification number: 10.1016/j.ribaf.2021.101381
Uncontrolled keywords: Foreign institutional investors; Information asymmetries; IFRS adoption; Foreign directors; Emerging markets
Subjects: H Social Sciences
Divisions: Divisions > Kent Business School - Division > Department of Accounting and Finance
Funders: University of Huddersfield (https://ror.org/05t1h8f27)
Depositing User: Yilmaz Yildiz
Date Deposited: 17 Feb 2023 11:48 UTC
Last Modified: 01 Mar 2024 14:45 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/100051 (The current URI for this page, for reference purposes)

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