Stock Market React to Foreign Investment: The Effects of Investment Purpose, Stock Market Characteristics, and Business Group Affiliation

23 Pages Posted: 14 Feb 2010

See all articles by Byoung Youp Lee

Byoung Youp Lee

University of London, King's College London, Department of Management

Jenifer Piesse

University of Stellbosch; King's College London - Department of Management

Roger Strange

University of Sussex

Date Written: January 10, 2010

Abstract

This paper examines how the public announcement of foreign share acquisitions in listed companies affects the share prices of those companies. The dataset contains 422 public announcements of foreign share acquisitions in Korean listed companies over the period from March 2005 to June 2009. The empirical analysis builds upon the findings of previous studies, but also considers the moderating effects of three factors: the motivation of the foreign investor (management participation or pure investment); the characteristics of the stock exchange on which the domestic companies are listed; and the effects of group affiliation. Using event study methods, the abnormal returns are obtained and statistical tests are undertaken between the mean returns for the different sub-groups. A significant 21-day cumulative abnormal return of 1.1% is found for the total sample, and the statistical tests suggest that the factors investigated influence the size of the abnormal gains.

Keywords: Corporate governance, foreign investment, blockholders, business groups, event study, emerging markets

JEL Classification: G14, G32, G34

Suggested Citation

Lee, Byoung Youp and Piesse, Jenifer and Strange, Roger Nicholas, Stock Market React to Foreign Investment: The Effects of Investment Purpose, Stock Market Characteristics, and Business Group Affiliation (January 10, 2010). Available at SSRN: https://ssrn.com/abstract=1504712 or http://dx.doi.org/10.2139/ssrn.1504712

Byoung Youp Lee

University of London, King's College London, Department of Management ( email )

150 Stamford Street
London, SE1 9NH
United Kingdom

Jenifer Piesse (Contact Author)

University of Stellbosch

Stellenbosch, Western Cape
South Africa

King's College London - Department of Management ( email )

Virginia Woolf Building
22 Kingsway
London, England WC2B 6NR
United Kingdom

Roger Nicholas Strange

University of Sussex ( email )

School of Business, Management and Economics
Mantell Building
Brighton, Sussex BN1 9RF
United Kingdom
(44)1273-873531 (Phone)

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