Foreign Ties that Bind: Cross-Border Firm Expansions and Fund Portfolio Allocation Around the World

62 Pages Posted: 27 Jul 2018 Last revised: 6 Mar 2020

See all articles by Fariborz Moshirian

Fariborz Moshirian

Institute of Global Finance, UNSW Business School

Peter K. Pham

Australian School of Business - University of New South Wales; Financial Research Network (FIRN)

Shu Tian

Asian Development Bank

Eliza Wu

The University of Sydney - Business School; Financial Research Network (FIRN)

Date Written: June 5, 2019

Abstract

We investigate whether international operations enhance information links between firms and foreign investors. Exploiting novel subsidiary-level data and within-firm-location variations, we show that, after a firm expands into a new market, it attracts a larger increase in portfolio allocation from destination-country funds than from other foreign funds. This effect is economically significant, equivalent to one-fifth of the average firm weight in funds' portfolios, and is not driven by funds' influence. It is also persistent, increases with pre-expansion information gaps, and generates superior risk-adjusted returns for destination-country funds. Our results suggest that firms' cross-border economic activities contribute to global financial interconnectedness. Internet appendix available at:
https://ssrn.com/abstract=3209972

JEL Classification: G11, G15, G32, G34

Suggested Citation

Moshirian, Fariborz and Pham, Peter Kien and Tian, Shu and Wu, Eliza, Foreign Ties that Bind: Cross-Border Firm Expansions and Fund Portfolio Allocation Around the World (June 5, 2019). Available at SSRN: https://ssrn.com/abstract=3209976 or http://dx.doi.org/10.2139/ssrn.3209976

Fariborz Moshirian

Institute of Global Finance, UNSW Business School ( email )

Sydney, NSW 2052
Australia
+61 2 93855859 (Phone)
+61 2 94877519 (Fax)

Peter Kien Pham (Contact Author)

Australian School of Business - University of New South Wales ( email )

UNSW Business School
High St
Sydney, NSW 2052
Australia

Financial Research Network (FIRN) ( email )

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Shu Tian

Asian Development Bank

6 ADB Avenue, Mandaluyong City 1550
Metro Manila
Manila, Metro Manila 1550
Philippines
63-2-6324915 (Phone)

Eliza Wu

The University of Sydney - Business School ( email )

University of Sydney
Darlington
Sydney, NSW 2006
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

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