AAA Spark Meeting of the Regions

Impact of China’s Belt & Road Initiative (BRI) on Foreign Institutional Investment: Winners and Losers among Pakistani Publicly Listed Firms

• In Event: Foreign Investments and Entities

Abstract

We investigate the impact of China’s BRI on foreign institutional investment in Pakistani public firms. The question of interest is whether the BRI attracted foreign institutional investment in Pakistani firms in the presence of low government transparency about the BRI. We find that, on average, Pakistani public firms did not experience significant growth in foreign institutional investment between the pre- and post-BRI periods. However, we find that foreign institutional investment increased for Pakistani firms affiliated with business groups relative to non-affiliated Pakistani firms between the pre- and post-BRI periods. We note that the results become stronger with higher level of groups diversification. Our finding of increased institutional investment for affiliated Pakistani firms also holds relative to matched Indian affiliated firms. These findings suggest that foreign institutional investors prefer business groups in emerging economies as a source of opportunity to overcome the institutional voids problem.

Authors

• Shahid Khan, The Pennsylvania State University Berks

• Waqar Ghani, St. Joseph University

• Harun Rashid, California State University, Dominguez Hills