Foreign Institutional Investors and Voluntary Disclosure around the World

• In Event: Determinants of Voluntary Disclosure

Abstract

This paper investigates whether foreign institutional investors affect firms’ information environment by influencing their voluntary disclosure practice. Specifically, we examine the effect of foreign institutional ownership on firm’s management forecasts in a large sample of firm-year observations across 32 non-U.S. countries. We find that foreign institutional investors have a larger impact than their domestic counterparts on increasing the probability, frequency, and informativeness of firms’ management forecasts. This finding is largely driven by foreign institutional investors originated from countries with stronger corporate governance than the firm’s home country. In addition, we also find that foreign institutional ownership is associated with management forecasts that are more specific and more disaggregated. Overall, our results suggest that cross-border institutional investments serve as an important channel in fostering better corporate disclosures practices and improving the information environment of firms around the world.

Authors

• Albert Tsang, The Chinese University of Hong Kong - University L

• Fei Xie, Clemson University

• Xiangang XIN, City University of Hong Kong