FOREIGN OWNERSHIP AND FIRM VALUE: EVIDENCE FROM JAPAN

We find a significant curvilinear relation between Japanese firm value and the percentage of equity held by foreign investors. Firm value rises until foreign ownership reaches approximately 40%, and then it begins to decline. It appears that large foreign institutional investors invest in well-performing firms and serve as effective monitors. Our results remain robust even after controlling for other corporate governance variables, such as equity ownership by main banks and board membership by foreign investors. It seems that most of the increase in firm value and the performance improvement are due to rising levels of equity ownership in non-keiretsu (independent) firms by foreign investors. We also show that an increase in foreign ownership is correlated with a rise in R&D expenditures, suggesting that foreign institutional investors contribute to the long-term viability and competitiveness of Japanese firms. © 2005 Elsevier Ltd. All rights reserved.
Publisher
JAI Press
Issue Date
2005-06
Language
ENG
Citation

Advances in Financial Economics 11, v.11, no.0, pp.1 - 29

ISSN
1569-3732
DOI
10.1016/S1569-3732(04)11001-3
URI
http://hdl.handle.net/10203/4060
Appears in Collection
KGSF-Journal Papers(저널논문)
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