The Foreign Investor Bias and its Linguistic Origins

58 Pages Posted: 6 Aug 2015 Last revised: 1 Apr 2016

See all articles by Russell J. Lundholm

Russell J. Lundholm

University of British Columbia - Sauder School of Business

Nafis Rahman

The University of Hong Kong - Faculty of Business and Economics

Rafael Rogo

Indiana University - Kelley School of Business - Department of Accounting

Date Written: March 2016

Abstract

We study how misaligned language between the investor and the firm contributes to the foreign investor bias. In particular, we document a significant US institutional investor bias against firms located in Quebec relative to firms located in the Rest of Canada (ROC). The differential bias is surprising given that Quebec and the ROC share the same country, federal law, stock exchange, accounting standards, and regulatory filings are prepared in both English and French; and given that US institutional investors are sophisticated investors at close geographic proximity to both Quebec and the ROC. We also contrast the bias of Quebec firms with different levels of French versus English online presence, and we contrast the bias of institutional investors located in the UK versus France, to bolster our conclusion that incongruent languages are a major source of bias.

Keywords: home bias, language, Quebec

JEL Classification: F30, G15

Suggested Citation

Lundholm, Russell J. and Rahman, Nafis and Rogo, Rafael, The Foreign Investor Bias and its Linguistic Origins (March 2016). Available at SSRN: https://ssrn.com/abstract=2639907 or http://dx.doi.org/10.2139/ssrn.2639907

Russell J. Lundholm (Contact Author)

University of British Columbia - Sauder School of Business ( email )

2053 Main Hall
Vancouver, British Columbia V6T 1Z2
Canada

Nafis Rahman

The University of Hong Kong - Faculty of Business and Economics ( email )

Pokfulam Road
Hong Kong
China

Rafael Rogo

Indiana University - Kelley School of Business - Department of Accounting ( email )

1309 E. 10th Street
Bloomington, IN 47405
United States

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