Portfolio preferences of foreign institutional investors |
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| Affiliation: | 1. Paul College of Business and Economics, University of New Hampshire, Durham, NH 03824, USA;2. Terry College of Business, University of Georgia, Athens, GA 30602, USA;3. School of Business, University of Kansas, Lawrence, KS 66045, USA;1. Shidler College of Business, University of Hawaii at Manoa, 2404 Maile Way, Honolulu, HI 96822, USA;2. Center for Economics, Finance and Management Studies (CEFMS), Hunan University, Changsha 410006, China;3. Accounting Department, Management School, Jinan University, Huangpu Road West, Guangzhou 510632, China;1. College of Business & Entrepreneurship, The University of Texas Rio Grande Valley, Edinburg, TX 78539, USA;2. Haub School of Business, Saint Joseph''s University, Philadelphia, PA 19131, USA;3. School of Business, State University of New York at Oswego, Oswego, NY 13126, USA;4. Craig School of Business, Missouri Western State University, St Joseph, MO 64507, USA |
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| Abstract: | This paper examines the investment allocation choices of actively-managed US mutual funds in emerging market equities after the market crises of the 1990s. We analyze both country- and firm-level disclosure and institutional policies that influence mutual funds’ allocation choices relative to major stock market indices. At the country level, we find that US funds invest more in open emerging markets with stronger accounting standards, shareholder rights, and legal frameworks. At the firm level, US funds are found to invest more in firms that adopt discretionary policies such as greater accounting transparency and the issuance of an ADR. Our results suggest that steps can be taken both at the country and the firm level to create an environment conducive to foreign institutional investment. |
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