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Book cover: Advances in Financial Economics

Advances in Financial Economics

ISSN: 1569-3732
Series editor(s): Professor Kose John, Professor Anil Makhija, Professor Stephen P. Ferris

Subject Area: Economics

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FOREIGN OWNERSHIP AND FIRM VALUE: EVIDENCE FROM JAPAN


Document Information:
Title:FOREIGN OWNERSHIP AND FIRM VALUE: EVIDENCE FROM JAPAN
Author(s):Stephen P. Ferris, Kwangwoo Park
Volume:11 Editor(s): Mark Hirschey, Kose John, and Anil K. Makhija ISBN: 978-0-7623-1187-3 eISBN: 978-1-84950-333-4
Citation:Stephen P. Ferris, Kwangwoo Park (2005), FOREIGN OWNERSHIP AND FIRM VALUE: EVIDENCE FROM JAPAN, in Mark Hirschey, Kose John, and Anil K. Makhija (ed.) Corporate Governance (Advances in Financial Economics, Volume 11), Emerald Group Publishing Limited, pp.1-29
DOI:10.1016/S1569-3732(04)11001-3 (Permanent URL)
Publisher:Emerald Group Publishing Limited
Article type:Chapter Item
Abstract:We find a significant curvilinear relation between Japanese firm value and the percentage of equity held by foreign investors. Firm value rises until foreign ownership reaches approximately 40%, and then it begins to decline. It appears that large foreign institutional investors invest in well-performing firms and serve as effective monitors. Our results remain robust even after controlling for other corporate governance variables, such as equity ownership by main banks and board membership by foreign investors. It seems that most of the increase in firm value and the performance improvement are due to rising levels of equity ownership in non-keiretsu (independent) firms by foreign investors. We also show that an increase in foreign ownership is correlated with a rise in R&D expenditures, suggesting that foreign institutional investors contribute to the long-term viability and competitiveness of Japanese firms.

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