Portfolio Preferences of Foreign Institutional Investors

41 Pages Posted: 23 Jul 2003 Last revised: 24 Feb 2012

Reena Aggarwal

Georgetown University - Robert Emmett McDonough School of Business

Leora F. Klapper

World Bank; World Bank - Development Research Group (DECRG)

Peter D. Wysocki

University of Miami - School of Business Administration

Date Written: September 1, 2004

Abstract

This paper examines investment allocations in emerging markets by actively-managed U.S. mutual funds. We analyze both country- and firm-level characteristics and policies that influence these investment allocations. At the country-level, we find that U.S. funds invest more in open emerging markets with stronger shareholder rights, legal frameworks and accounting policies. After controlling for country characteristics, U.S. funds are found to invest more in large growing firms with high analyst following and policies such as ADR listing and more transparent accounting policies. The impact of ADR listing and better accounting policies is most pronounced in countries with weaker investor protection. Our results suggest that steps can be taken both at the country- and the firm-level to create an environment conducive to foreign institutional investment.

Keywords: Institutional Investors, Portfolio Allocations, Emerging Markets, Corporate Governance

JEL Classification: G23, G34, G15, M41

Suggested Citation

Aggarwal, Reena and Klapper, Leora F. and Wysocki, Peter D., Portfolio Preferences of Foreign Institutional Investors (September 1, 2004). Journal of Banking and Finance, Vol. 29, No. 12, 2005. Available at SSRN: https://ssrn.com/abstract=424262 or http://dx.doi.org/10.2139/ssrn.424262

Reena Aggarwal (Contact Author)

Georgetown University - Robert Emmett McDonough School of Business ( email )

3700 O Street, NW
Washington, DC 20057
United States
202-687-3784 (Phone)
202-687-0798 (Fax)

HOME PAGE: http://explore.georgetown.edu/people/aggarwal/

Leora F. Klapper

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States
202-473-8738 (Phone)

HOME PAGE: http://econ.worldbank.org/staff/lklapper

World Bank - Development Research Group (DECRG)

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States

Peter D. Wysocki

University of Miami - School of Business Administration ( email )

Department of Accounting - K/E 308
5250 University Drive
Coral Gables, FL 33146-6531
United States
305-284-8618 (Phone)

Paper statistics

Downloads
1,108
Rank
14,368
Abstract Views
5,670