Information Asymmetry, Disclosure and Foreign Institutional Investment: An Empirical Investigation of the Impact of the Sarbanes-Oxley Act

54 Pages Posted: 8 Apr 2015 Last revised: 28 Nov 2015

See all articles by Nida Abdioglu

Nida Abdioglu

Bandirma Onyedi Eylul University/ Faculty of Economics and Administrative Sciences

Vassiliki C. Bamiatzi

Independent

S. Tamer Cavusgil

Georgia State University

Arif Khurshed

University of Manchester - Manchester Business School, Division of Accounting Finance

Konstantinos Stathopoulos

The University of Manchester - Alliance Manchester Business School

Date Written: January 1, 2015

Abstract

Do foreign institutional investors (FII) regard the introduction of rigorous disclosure requirements as a major incentive to invest in U.S. equities? We investigate the role of information asymmetry and the impact of firm-level disclosure on FII decisions. We use a unique context for analysis -- the enactment of the Sarbanes-Oxley Act (SOX), and find that foreign institutional investors increase their equity holdings in U.S. listed firms following the passage of SOX. The increase in U.S. equity holdings is largely accounted by passive, non-monitoring FII, who have the most to gain from the SOX-led reduction in the value of private information.

Keywords: Institutional Foreign Investors, Information Asymmetry, Active and Passive Institutional Investors, Sarbanes-Oxley Act

Suggested Citation

Abdioglu, Nida and Bamiatzi, Vassiliki C. and Cavusgil, S. Tamer and Khurshed, Arif and Stathopoulos, Konstantinos, Information Asymmetry, Disclosure and Foreign Institutional Investment: An Empirical Investigation of the Impact of the Sarbanes-Oxley Act (January 1, 2015). Leeds University Business School Working Paper No. 15-06. Available at SSRN: https://ssrn.com/abstract=2591256 or http://dx.doi.org/10.2139/ssrn.2591256

Nida Abdioglu (Contact Author)

Bandirma Onyedi Eylul University/ Faculty of Economics and Administrative Sciences ( email )

Balikesir, 10200
Turkey

Vassiliki C. Bamiatzi

Independent

No Address Available

S. Tamer Cavusgil

Georgia State University

35 Broad Street
Atlanta, GA 30303-3083
United States

Arif Khurshed

University of Manchester - Manchester Business School, Division of Accounting Finance ( email )

Crawford House
Oxford Road
Manchester, M15 6PB
United Kingdom
+44 0 161 275 4475 (Phone)
+44 0 161 275 4023 (Fax)

Konstantinos Stathopoulos

The University of Manchester - Alliance Manchester Business School ( email )

AMBS Building
Booth Street West
Manchester, M15 6PB
United Kingdom
+44 161 275 6863 (Phone)
+44 161 275 4023 (Fax)

HOME PAGE: http://www.research.manchester.ac.uk/portal/K.Stathopoulos.html

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