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Navigating Weak Institutions through Foreign Broker Reputation

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Title:Navigating Weak Institutions through Foreign Broker Reputation
Authors:Yoon, Aaron
Keywords:investment bank
institutional investors
show 3 moreemerging market
market liberalization
Shanghai-Hong Kong Connect
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Date Issued:31 Aug 2018
Abstract:I study how firms signal their quality and attract foreign investors when they operate in a market characterized by weak enforcement and legal protection. Using a proprietary disclosure dataset, I examine how Chinese firms respond to a market liberalization pilot program. I find that affected firms responded through increasing the number of selective private meetings hosted by major foreign investment banks instead of using public disclosure channels. These firms experienced an increase in foreign institutional holdings after the liberalization’s implementation, and exhibited more stable stock performance and retained foreign investors during a subsequent market crash. Overall, the results are consistent with firms using communication channels certified by reputable foreign investment banks to attract and maintain foreign investment.
Appears in Collections: 18 Financial: Credit ratings/Intangible assets/other financial accounting issues

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