Abstract

http://ssrn.com/abstract=2409909
 


 



How Do Foreign Institutional Investors Enhance Firm Innovation?


Luong Hoang Luong


University of New South Wales (UNSW) - School of Banking and Finance

Fariborz Moshirian


Institute of Global Finance, UNSW Business School

Lily H.G. Nguyen


La Trobe University - La Trobe Business School - Department of Finance; Financial Research Network (FIRN)

Xuan Tian


Indiana University - Kelley School of Business - Department of Finance

Bohui Zhang


University of New South Wales (UNSW) - School of Banking and Finance; Financial Research Network (FIRN)

November 1, 2015

Kelley School of Business Research Paper No. 2014-04

Abstract:     
We examine the effect of foreign institutional investors on firm innovation. Using a difference-in-differences approach that relies on plausibly exogenous variation generated by a quasi-natural experiment as well as an instrumental variable approach, we find that foreign institutional ownership appears to have a positive, causal effect on firm innovation. We further explore three possible underlying mechanisms through which this observation occurs: foreign institutions appear to act as active monitors, to provide insurance for firm managers against innovation failures, and to promote technology transfers from high-innovation countries. Our paper sheds new light on the real effects of foreign institutions.

Number of Pages in PDF File: 65

Keywords: Firm innovation; R&D investment; Institutional investors; Foreign investment

JEL Classification: G23; G32; G34


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Date posted: March 17, 2014 ; Last revised: July 25, 2016

Suggested Citation

Luong, Luong Hoang and Moshirian, Fariborz and Nguyen, Lily H.G. and Tian, Xuan and Zhang, Bohui, How Do Foreign Institutional Investors Enhance Firm Innovation? (November 1, 2015). Kelley School of Business Research Paper No. 2014-04. Available at SSRN: http://ssrn.com/abstract=2409909 or http://dx.doi.org/10.2139/ssrn.2409909

Contact Information

Luong Hoang Luong
University of New South Wales (UNSW) - School of Banking and Finance ( email )
Sydney, NSW 2052
Australia

Fariborz Moshirian
Institute of Global Finance, UNSW Business School ( email )
Sydney, NSW 2052
Australia
+61 2 93855859 (Phone)
+61 2 94877519 (Fax)

Lily H.G. Nguyen
La Trobe University - La Trobe Business School - Department of Finance ( email )
Melbourne, VIC, 3086
Australia

Financial Research Network (FIRN)
C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia
HOME PAGE: http://www.firn.org.au

Xuan Tian (Contact Author)
Indiana University - Kelley School of Business - Department of Finance ( email )
1309 E. Tenth Street
Bloomington, IN 47405
United States
812-8553420 (Phone)
824-8555875 (Fax)
HOME PAGE: http://kelley.iu.edu/tianx

Bohui Zhang
University of New South Wales (UNSW) - School of Banking and Finance ( email )
Australian School of Business
Sydney NSW, 2052
Australia
61293855834 (Phone)
61293856347 (Fax)
HOME PAGE: http://www.banking.unsw.edu.au/nps/servlet/portalservice?GI_ID=System.LoggedOutInheritableArea&maxWn

Financial Research Network (FIRN)
C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia
HOME PAGE: http://www.firn.org.au

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