Determinants of foreign portfolio investment in emerging markets: evidence from Saudi stock market

Badawi, Ahmed; Qudah, Anas Al; Rashideh, Waleed

doi:10.1007/s12197-019-09482-8

Cited by 9 publications

(17 citation statements)

References 33 publications

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“…Previous research only considers country-level factors as determinants of foreign investment and limited literature exists for firm-level determinants of foreign investment. For instance, interest rate differential is one of the key factors that can determine the capital flows in a host country (Badawi et al, 2019). Waqas et al (2015) find evidence in favour of the above argument that the interest rate significantly affects the FPI flows to South Asian countries.…”

Section: Literature Reviewmentioning

confidence: 99%

“…The literature suggests certain country-level factors that determine the FPI in a country. First, interest rate differential is one of the critical factors that can determine the capital flows in a host country (Schumacher, 2018;Badawi et al, 2019). Waqas et al (2015) find evidence in favour of above argument, suggesting interest rate significantly affects the FPI flows to South Asian countries.…”

Section: Introductionmentioning

confidence: 99%

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Determinants of foreign investment in Pakistan

Ullah

Tahir

2020

SAJBS

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PurposeThe purpose of this study is to examine the effect of country- and firm-specific factors on foreign investment in Pakistan.Design/methodology/approachThis study uses time-series data for country-level determinants and uses panel data for 100 listed non-financial companies selected based on market capitalisation from 2005 to 2015.FindingsFindings suggest that the stock market returns and liquidity of the country significantly positively influence the foreign portfolio investment (FPI) in Pakistan. Whereas, economic growth surprisingly is negatively related to foreign portfolio investment. In addition, findings reveal that firm size, financial leverage, dividend yield and global depositary receipts (GDR) have a positive impact on the total foreign investment at firm level. Further, foreign institutional investors prefer to invest in those firms that are large, pay high dividends and issue GDR. Furthermore, findings suggest that foreign direct investors tend to invest in firms that are financially leveraged and have low capital gain yield.Practical implicationsAt the country level, this study recommends that stock market performance, economic growth and foreign reserves of the country should be maintained and improved to attract FPI. At the firm level, this study recommends issuance of global depositary receipts and high dividend payouts for those firms that are interested in institutional investment in Pakistan.Originality/valueTo the best of authors' knowledge, this study is the first that examines the effect of firm-level factors along with country-level factors on foreign investment in Pakistan.

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Section: Literature Reviewmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Determinants of foreign investment in Pakistan

Ullah

Tahir

2020

SAJBS

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“…Yeh (2018) also confirmed a positive and significant effect of director ownership on foreign ownership. Badawi et al (2019) studied the impact of government ownership on foreign shareholding in Saudi listed firms using data from 2015. They found that government ownership has a negative and significant effect on foreign ownership.…”

Section: Literature Review and Hypotheses De-velopmentmentioning

confidence: 99%

“…Empirical studies provide mixed evidence regarding the impact of board directors and ownership structure on foreign investments (Covrig et al, 2006;Leuz et al, 2009;Min & Bowman, 2014;Miletkov, et al, 2014;Das, 2014;Yatim et al, 2016;Yeh, 2018;Badawi et al, 2019). Covrig et al (2006) studied similarities and differences in the stock preferences of domestic and foreign fund managers for 11 developed countries.…”

Section: Introductionmentioning

confidence: 99%

“…In fact, most previous governance research in Saudi Arabia focused on how board governance and ownership structure influences firm performance. A review of the prior studies found that only Badawi et al (2019) examined the determinants of foreign ownership among Saudi listed firms. Thus, the present investigation extends that study by examining the role of board governance in attracting foreign investors.…”

Section: Introductionmentioning

confidence: 99%

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Board Governance, Ownership Structure and Foreign Investment in the Saudi Capital Market

Habbash¹,

Alborr²,

Bajaher³

2020

R. Econ. and Finan.

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Saudi vision 2030 targets, among other objectives, the attraction of foreign direct investment into the Saudi capital market. This paper examines whether board governance mechanisms and ownership structure play a role in foreign investors' decisions when buying shares in Saudi listed companies. Foreign investment in the Saudi capital market started in 2015 and reached a peak in 2019, with corporate governance regulations having been updated in 2017. We tested the proposed relationships using hand collected data for all Saudi non-financial firms in 2019.While board governance is a critical mechanism in firms, this study found that it does not play a role in attracting foreign investment in the Saudi capital market. Foreign investors also seem to avoid firms with concentrated ownership that either have high government or director ownership; however, accounting and market variables show significant impact on foreign investors' decisions.The outcomes of this study provide empirical evidence that current foreign investors in the Saudi stock market do not place enough merit on board governance and their investment decisions tend to depend on share performance. Thus, our results show that the current governance changes and capital market regulations in Saudi Arabia may not have been sufficient to stimulate the inflow of institutional foreign investment to the country to date, but rather they have attracted individual retail foreign investors.These findings have crucial implications for foreign funds and Saudi market regulators as they highlight issues related to the Qualified Foreign Investor (QFI) program as well as researchers who work toward understanding foreign investors' behaviors in emerging markets.

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Dynamic relationship between ownership structure and financial performance: a Saudi experience

Bazhair

Alshareef

2022

Cogent Business & Management

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Determinants of foreign portfolio investment in emerging markets: evidence from Saudi stock market

Cited by 9 publications

References 33 publications

Determinants of foreign investment in Pakistan

Determinants of foreign investment in Pakistan

Board Governance, Ownership Structure and Foreign Investment in the Saudi Capital Market

Dynamic relationship between ownership structure and financial performance: a Saudi experience

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