Portfolio Preferences of Foreign Institutional Investors
Georgetown University - Robert Emmett McDonough School of Business
Leora F. Klapper
World Bank; World Bank - Development Research Group (DECRG)
Peter D. Wysocki
University of Miami - School of Business Administration
September 1, 2004
Journal of Banking and Finance, Vol. 29, No. 12, 2005
This paper examines investment allocations in emerging markets by actively-managed U.S. mutual funds. We analyze both country- and firm-level characteristics and policies that influence these investment allocations. At the country-level, we find that U.S. funds invest more in open emerging markets with stronger shareholder rights, legal frameworks and accounting policies. After controlling for country characteristics, U.S. funds are found to invest more in large growing firms with high analyst following and policies such as ADR listing and more transparent accounting policies. The impact of ADR listing and better accounting policies is most pronounced in countries with weaker investor protection. Our results suggest that steps can be taken both at the country- and the firm-level to create an environment conducive to foreign institutional investment.
Number of Pages in PDF File: 41
Keywords: Institutional Investors, Portfolio Allocations, Emerging Markets, Corporate Governance
JEL Classification: G23, G34, G15, M41Accepted Paper Series
Date posted: July 23, 2003 ; Last revised: February 24, 2012
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