Foreign institutional ownership information asymmetry and firm value - Empirical study from Korea
Abstract
This paper examines the effect of foreign institutional ownership and information asymmetry on firm value for a sample of 15,618 firm-year observations of Korean listed companies for the period from 1988 to 2017 and finds that foreign institutional ownership has a positive and significant relationship with firm value, whereas domestic institutional ownership does not have any effect on firm value. The paper also finds evidence that asymmetrical information is negatively associated with firm value. Our findings suggest that foreign institutional investors monitor firm activities better than domestic institutional investors when they tend to pursue the strategies that improve the value of the company in the long-term. Furthermore, we find that the existence of foreign institutional ownership contributes to declining asymmetric information in Korea.