Are Foreign Investors Locusts? The Long-Term Effects of Foreign Institutional Ownership

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• Professor Pedro Matos, Associate Professor of Finance at Darden School of Business
• Thursday 10 March 2016, 10:30-12:00
• Cambidge Judge Business School, W4.05.

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This paper challenges the view that foreign investors lead firms to adopt a short-term orientation and forgo long-term investment. Using a comprehensive sample of publicly listed firms in 30 countries over the 2001-2010 period, we find instead that greater foreign institutional ownership fosters long-term investment in tangible, intangible, and human capital. Foreign institutional ownership also leads to significant increases in innovation output. We identify these effects by exploiting the exogenous variation in foreign institutional ownership that follows the addition of a firm to the MSCI indices. Our results suggest that foreign institutions exert a disciplinary role on entrenched corporate insiders worldwide.

This talk is part of the Finance & Accounting Seminar Series series.

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• CERF and CF Events
• Cambidge Judge Business School, W4.05
• Finance & Accounting Seminar Series

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