How does FX liquidity affect the relationship between foreign ownership and stock liquidity?

This study investigates the roles foreign investors play in a representative emerging market, focusing on the relationship between foreign ownership and stock market liquidity as well as this relationship's response to foreign exchange (FX) liquidity. Our analyses yield three main results. First, the bid–ask spread and price impact of stock trades decrease along with foreign ownership, supporting the view that foreign investors tend to improve stock liquidity. Second, foreign ownership decreases along with a decline in FX liquidity, suggesting that foreign investors care about FX liquidity when determining their stock holdings. Third, stock liquidity increases continuously along with foreign ownership as FX liquidity decreases. Overall, this study's evidence indicates that foreign investors, as liquidity providers, can play a positive role in an emerging economy even when FX liquidity declines.     

Foreign Ownership and Performance: Evidence from Italian Firms

This paper studies the impact of foreign ownership on a firm’s economic performance. We use a unique panel data set to test the foreign ownership premium by comparing our sample of firms based in Italy and owned by a foreign subject to a sample of purely domestic firms that, in order to have a proper counterfactual, were selected using propensity score matching. Our difference-in-differences results show the existence of a premium for the size, profitability, and financial soundness of the foreign-owned companies. The premium increases with time, is concentrated in the service sector, and disappears if the foreign investor is based in a fiscal haven.     

Explaining country and cross‐border liquidity commonality in international equity markets

Using a large cross section of intraday data from 25 developed countries, we study commonality in liquidity, both within and across international equity markets, over 15‐minute intervals. Within‐country and cross‐border liquidity commonalities are found to be significant and, after controlling for country and industry effects, relate to such firm‐specific measures as size, bid–ask spread, and the extent of analyst coverage. Additionally, within‐country liquidity commonality is lower for firms with depository receipts cross listed in New York or London. Cross‐border liquidity commonality is particularly high for firms with relatively high actual ownership by foreign institutions. © 2009 Wiley Periodicals, Inc. Jrl Fut Mark 29:630–652, 2009     

Stock liquidity and ownership structure during and after the 2008 Global Financial Crisis: Empirical evidence from an emerging market

This paper examines the impact of ownership structure, whether state owned, foreign owned or institutionally owned, on Vietnamese stock market liquidity in different market conditions. We find that state ownership is associated with lower liquidity after the 2008 financial crisis. Institutional ownership shows a weak influence on liquidity in the post-crisis period. During the financial crisis, however, liquidity declines could not be attributed to ownership structure. Our results imply that foreign investors have not yet played a significant role in driving stock market liquidity in Vietnam, which is counter to findings in the existing literature concerning liquidity in more developed markets. Our results are consistent across conventional liquidity measures and a composite liquidity measure.     

Liquidity,exchange listing,and common stock performance

The liquidity of securities—the relationship between volume of trading and changes in market price—has won increasing recognition as an element of investment strategy in recent years. Relatively high liquidity is deemed to be a desirable characteristic of a stock, especially for the institutional investor, who typically trades in large volume. Thus, firms can generally be expected to seek means of enhancing the liquidity of their shares. One of the supposed means of accomplishing this is by listing one's stock on a national securities exchange. This paper examines the relationship of common stock liquidity to both exchange listing and price behavior during major up and down movements in the market. Our conceptual and empirical analyses indicate that liquidity is linked to price behavior; and we suggest that the view held by at least some corporate officers—that exchange listing increases liquidity—may be erroneous. More specifically, it appears that when the amount of firm capitalization is taken into account, exchange listing does not result in greater stock liquidity.     

The diversifiability of exchange risk

Discussions of the determinants of the spot or forward exchange rate frequently argue that holders of foreign assets that are subject to exchange risk must be compensated by a risk premium. This paper shows that much of exchange risk is diversifiable. If there are no outside assets and the value of the currency is uncorrelated with the value of other forms of wealth, then all exchange risk is diversifiable; there is no risk premium. More generally, there is a risk premium, but it need not be related to foreign indebtedness or to the variability of the exchange rate as commonly presumed.     

The decision to export: Firm heterogeneity,sunk costs,and spatial concentration

Integrating perspectives of the Uppsala model of internationalization process, international new ventures and trade theories of heterogeneous firms, this paper develops a dynamic discrete-choice model of export decisions by a profit-maximizing firm. Empirical analyses based on a panel data set of Chinese firms show that sunk costs, productivity, firm size, foreign ownership, industry competition and spatial concentration are positively associated with the decision to export, while state ownership has a negative association with the probability of exporting. However, we find that the relationships are not always uniform and depend on firm-specific idiosyncrasies. The results show that foreign-invested firms and large firms (regardless of ownership) rely on productivity performance related advantages for expanding overseas, while domestic firms, especially small- and medium-sized enterprises, build competitive advantage by leveraging agglomeration economies and the associated spillovers. Our results highlight the role of firm heterogeneity, sunk costs and spatial concentration in shaping the export behavior of firms.     

Stock market liquidity,family ownership,and capital structure choices in an emerging country

This study examines the impact of equity liquidity and family ownership on capital structure decisions in an emerging market context. Using univariate analysis, I find a positive relationship between liquidity and leverage. Further, this study uses multivariate panel regression analysis with firm clustering, and controls for other variables. Contrary to studies on U.S. firms, I find insignificant empirical evidence that stock liquidity increases leverage for Egyptian firms. Moreover, evidence shows a significant positive relationship between family ownership and leverage. These results hold when employing the instrumental variables approach and estimating two-stage least Squares regressions to control for the endogeneity problem.     

外资进入、劳动收入份额与技能工资溢价——来自2008年服务业企业普查数据的经验分析

运用2008年第二次全国经济普查服务业企业数据,文章实证检验了外资进入对服务业企业劳动收入份额和技能工资溢价的影响。结果显示外资企业存在更高的劳动收入份额,且外资进入程度对当地企业的劳动收入份额存在正向的外溢效应。文章进一步将不同所有制类型与技能劳动力占比的交互项引入工资方程,发现外资企业存在更高的技能工资溢价。我们进一步验证了外资进入对当地劳动力市场技能工资溢价的影响。结果表明,在那些外资渗透率较高、市场竞争相对激烈的地区和行业,外资企业的技能工资溢价现象会产生溢出效应,促使当地企业提高对高技能员工的薪酬待遇。因此,在合理发挥服务业外资进入对收入分配优化效应的同时,也要采取相关措施防止其进一步拉大工资差距。     

Is there really a foreign ownership wage premium? Evidence from matched employer-employee data

Numerous studies on firm-level data have reported higher average wages in foreign-owned firms than in domestically owned firms. This, however, does not necessarily imply that the individual worker's wage increase with foreign ownership. Using detailed matched employer-employee data on the entire Swedish private sector, we examine the effect of foreign ownership on individual wages, controlling for individual and firm heterogeneity as well as for possible selection bias in foreign acquisitions. We distinguish between foreign greenfields and takeovers and compare foreign-owned firms with both domestic multinationals and local firms. Our results show a considerably smaller wage premium in foreign-owned firms than what has been found in studies conducted at a more aggregate level. Moreover, foreign takeovers of Swedish firms tend to have no or even a negative effect on wages.     

Is there really a foreign ownership wage premium? Evidence from matched employer–employee data

Numerous studies on firm-level data have reported higher average wages in foreign-owned firms than in domestically owned firms. This, however, does not necessarily imply that the individual worker's wage increase with foreign ownership. Using detailed matched employer–employee data on the entire Swedish private sector, we examine the effect of foreign ownership on individual wages, controlling for individual and firm heterogeneity as well as for possible selection bias in foreign acquisitions. We distinguish between foreign greenfields and takeovers and compare foreign-owned firms with both domestic multinationals and local firms. Our results show a considerably smaller wage premium in foreign-owned firms than what has been found in studies conducted at a more aggregate level. Moreover, foreign takeovers of Swedish firms tend to have no or even a negative effect on wages.     

What Drives Foreign Ownership in Japan? Evidence from Before and After Japan's Financial Crisis

The ownership structure of Japanese firms has long been characterized by the superiority of ownership by banks and business partners; however, after the mid-1990s, the relative share of foreign ownership increased significantly. Results from this study suggest that almost 90% of the variance in foreign ownership occurs within and between firms. As expected, a substantial percentage of the variance of foreigner ownership is explained by macroeconomic shocks. The results indicate that firm size, profitability, dividends, risk, and financial health are important factors that drive foreign ownership.     

Mitigating the dual liability of newness and foreignness in capital markets: The role of returnee independent directors

Foreign firms undergoing an initial public offering in developed economies face a dual liability of newness and foreignness that can negatively impact the firm’s ability to access capital. In this study, we examine the ability of returnee independent directors to overcome such a liability among 232 foreign listings in the U.S. We find that returnee independent directors positively impact the price premium of the foreign IPO. We also find that this relationship is contingent on the level of ownership retained by non-independent directors, the level of ownership retained by venture capitalists, and investor protection in the firm’s country of origin.     

Exchange rate exposure

In this paper we examine the relationship between exchange rate movements and firm value. We estimate the exchange rate exposure of publicly listed firms in a sample of eight (non-US) industrialized and emerging markets. We find that exchange rate movements do matter for a significant fraction of firms, though which firms are affected and the direction of exposure depends on the specific exchange rate and varies over time, suggesting that firms dynamically adjust their behavior in response to exchange rate risk. Exposure is correlated with firm size, multinational status, foreign sales, international assets, and competitiveness and trade at the industry level.     

Market performance and deviance from industry norms: (Mis)alignment of organizational risk and industry risk

Much of the attention in the risk literature focuses on organizational risk. This research argues that industry-level risk indirectly influences firm performance in addition to the direct effects of organizational risk. We contend industry-level risk norms influence market performance. Our general hypothesis is that when managers pursue strategies that deviate from industry risk norms, the firm's market performance will decline. We also test for the moderating effects of performance relative to targets and managerial ownership. The general hypothesis was supported for market risk and returns risk, but not for strategic risk. In addition, performance relative to target moderates this deviation-market performance relationship for market and returns risk. These findings have implications for the risk literature, particularly a firm's risk premium, and institutional theory, in terms of the tradeoff related to conformity to norms.     

Foreign Wage Premium,Gender and Education: Insights from Vietnam Household Surveys

This paper investigates the differential impacts of foreign ownership on wages for different types of workers (in terms of educational background and gender) in Vietnam using the Vietnam Household Living Standards Surveys of 2002 and 2004. Whereas most previous studies have compared wage levels between foreign and domestic sectors using firm‐level data (thus excluding the informal sector), one advantage of using the Living Standards Surveys in this paper is that the data allow wage comparison analyses to extend to the informal wage sector. A series of Mincerian earnings equations and worker‐specific fixed effects models are estimated. Several findings emerge. First, foreign firms pay higher wages relative to their domestic counterparts after controlling for workers' personal characteristics. Second, the higher the individual workers' levels of education, the larger on average are the wage premiums for those who work for foreign firms. Third, longer hours of work in foreign firm jobs relative to working in the informal wage sector are an important component of the wage premium. Finally, unskilled women experience a larger foreign wage premium than unskilled men, reflecting the low earning opportunities for women and a higher gender gap in the informal wage sector.     

Ownership and technical efficiency in Malaysia's automotive industry: A stochastic frontier production function analysis

This article examines the direct effect of the extent of foreign ownership on technical efficiency in Malaysia's automotive industry by applying a stochastic frontier production function analysis to micro-panel data over the years 2000–2004. Technical efficiency in the overall automotive industry is positively related to the degree of vertical integration, the size of establishments in the respective sub-sectors, a higher quality of the work force, and a higher foreign ownership share in the establishment combined with higher net-import intensity. Foreign ownership and net-export intensity are not significant determinants of technical efficiency inthe parts sub-sector. Although majority foreign ownership is not allowed in the assembly sub-sector, this sub-sector is large, with asmall number of establishments generating scale economies in the automotive industry. The determinants of technical efficiency in the parts sub-sector show that foreign ownership per se does not enhance technical efficiency since other determinants like the degree of vertical integration and the size of establishments are significant determinants of technical efficiency.     

Risk premia in forward exchange rates: systematic or unsystematic?

International traders frequently use forward exchange transactions to hedge their cash flows in foreign currencies. A key issue is whether the forward rates are efficiently priced. There is evidence of time-varying risk premia in forward exchange rates. Are these risk premia systematic or unsystematic? This article uses a market model to explain risk, implying that the risk premium in the forward rate varies pari passu with the beta of the return to speculative forward positions. Assuming the unobserved risk premium is proportional to the forward premium allows testing the predicted relations; the data reject the joint hypotheses of the model and systematic risk. In terms of a simple factor model explaining the covariation of the forward premium, the risk premium, and the expected percentage rate of change of the spot exchange rate, the assumption that the forward premium and the risk premium are proportional can be relaxed without changing the empirical results.     

Stock Market Liquidity and Firm Value: An Empirical Examination of the Australian Market

We document a positive relation between stock liquidity and firm value. We examine the mechanism through which stock market liquidity enhances firm value by dividing firm value, as measured by Tobin's Q, into three components, namely, operating income to price, leverage, and operating income to assets. Using the switch to broker anonymity as an exogenous shock to market liquidity, we show that the increase in liquidity around the shock leads to an increase in firm value. Our results suggest that higher firm value for more liquid stocks seems to stem from enhanced stock prices rather than from better operating performance.     

Turnover and return in global stock markets

I study how growth affects liquidity of global stock exchanges and how liquidity determines cross-sectional returns on those stock exchange index portfolios. I measure portfolio liquidity by turnover ratio computed as value of shares traded over the market capitalization. I obtain data from FIBV, an association of global stock exchanges. In a multiple regression model for turnover ratio, I find age, size, type of exchange, competition for order flow, and growth rate to be significant determinants of portfolio liquidity; however, exchange- and time-specific effects are more appropriate for modeling portfolio liquidity. The time effects yield to three distinct regimes, while the exchange-specific effects are surrogates for the legal systems, English common law, and Civil laws of the countries. I estimate the parameters of a multiple regression model in a two-stage GLS framework in which index return is a function of turnover. The GLS method is preferable since a turnover ratio may have a non-stationary, random component. The significant determinants of index return are turnover and volatility, although some of the volatility effect may be a spillover from a January effect. Investors expect higher return from high turnover markets. However, the positive turnover expected return relation is true only in emerging markets; in developed markets expected return is a function of volatility. This result confirms existing empirical evidence that high turnover stock portfolios generate superior returns and further the sources and pricing of risk in emerging and developed markets are different.