The Determinants of Cross-Border Equity Flows

Abstract

We have received outstanding research assistance from Gino Cateau, Yonghyup Oh and Chris Walters, and additional help from HaYan Lee, Daniel Halmer, and Elisabetta Falcetti. Angela Cozzini of Cross Border Capital very kindly provided the data on equity investment flows.

Diversity of Institutional Investors and Foreign Blockholdings in France: The Evolution of an Institutionally Hybrid Economy

“…The increased prominence of institutional investors in French corporate governance needs to be reconciled with the presence of institutional diversity across advanced capitalist economies -and with the presence of institutional hybridization in France (Hall & Soskice, 2001;Whitley, 1999). Previous studies have highlighted the importance of institutional compatibility and proximity on the strategy of international diversification of institutional investors (Chan et al, 2005;Portes & Rey, 2005;Wójcik, 2009). Foreign institutional investors, especially when acquiring blockholding stakes in companies outside of their home market, attach great importance to the acquisition of knowledge about the functioning of the institutions of "local" markets and the context-specific process by which portfolio companies coordinate their activities that, in turn, enable them to achieve superior returns (Clark & Wójcik, 2007;Hau, 2001).…”

“…Other streams of studies on the interaction between domestic features of national systems of corporate governance and global financial markets have highlighted the importance of institutional "proximity" on the investment allocation and portfolio performance of institutional investors in foreign settings (Chan, Corvig, & Ng, 2005;Portes & Rey, 2005). Portfolio managers may often bring to other systems of corporate governance a set of expectations that challenge prevailing modes of firm governance (Kahan & Rock, 2007;Morin, 1998), but the effectiveness of active investment strategies that seek out companies likely to implement strategies of shareholder value enhancement (or pressure portfolio companies to implement such changes) is significantly influenced by features of the local context, namely the process by which firms coordinate their activities and the extent to which the circulation of information is primarily internal to important stakeholders (Aguilera, Filatotchev, Gospel, & Jackson, 2008;Wójcik, 2009).…”

Ageing, Pension Reform and Capital Flows: A Multi‐Country Simulation Model

“…French and Poterba 1991). Portes and Rey (2005) suggest that information asymmetries across countries are a major source of home bias effects and that capital flows are affected by both geographic and informational proximity. Applied to pension reform policies, this literature suggests that households might be more willing to invest their retirement savings in 'similar' countries, such as members of the EU or OECD, rather than in developing countries.…”

The Travels of a Bank Deposit in Turbulent Times: The Importance of Deposit Insurance Design for Cross‐border Deposits

“…Later studies utilize this model to investigate the impact of other bilateral characteristics, including joint trade agreements, common currency memberships, or cultural distances. Following Portes and Rey (2005), who argue that the gravity model is a powerful work horse for asset trade as well, gravity modeling has more recently been extended to international finance, in general, and to cross-border depositing, in particular (Sander, Kleimeier, and Heuchemer 2016). 5 We thus apply a gravity model framework to empirically analyze the impact of DI schemes on 5.…”