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Domestic Investor Protection and Foreign Portfolio Investment

42 Pages Posted: 21 Aug 2011 Last revised: 6 Apr 2012

Maela Giofré

University of Turin - Department of Economics and Statistics; CeRP-CCA; Netspar

Date Written: April 5, 2012

Abstract

This paper investigates the impact of domestic investor protection on equity cross-border investment. We bring to light a lower sensitivity of foreign investment to destination countries' corporate governance for those investors enjoying a higher degree of investor protection at home. This evidence is consistent with the conjecture that high standards of corporate governance at home make investors less familiar with problems related to weak investor protection and then less sensitive to this issue when choosing the composition of their foreign portfolio. As an ensuing perverse effect, assets issued by well protected foreign countries are those more severely penalized in portfolios held by investing countries featuring stronger investor protection.

Keywords: International portfolio investments, Investor Protection Rights, Home bias

JEL Classification: G11, G15, G30

Suggested Citation

Giofré, Maela, Domestic Investor Protection and Foreign Portfolio Investment (April 5, 2012). Available at SSRN: https://ssrn.com/abstract=1913285 or http://dx.doi.org/10.2139/ssrn.1913285

Maela Giofré (Contact Author)

University of Turin - Department of Economics and Statistics ( email )

Lungo Dora Siena 100/A
Torino, Turin - Piedmont 10153
Italy

CeRP-CCA ( email )

Via Real Collegio 30
Moncalieri (TO), Turin 10024
Italy

Netspar ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

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