Corporate governance and long-run performance of equity issues: The role of foreign ownership in Taiwan

Yenn Ru Chen, Jeng Ren Chiou, Ting-Kai Chou, Ming Sian Syue

Research output: Contribution to journalArticle

8 Citations (Scopus)

Abstract

It is widely argued that foreign shareholding is a mechanism for improving corporate governance in emerging markets. We provide the evidence of the monitoring benefits of foreign ownership of equity issues, a setting where we argue the effects of monitoring are likely to be important. We analyze the relationship between foreign ownership and stock price, as well as operating performance following public equity issues, by using a sample of Taiwanese firms conducting seasoned equity offerings (SEOs) from 1991 to 2002. Empirical results show that post-issue stock returns and changes in operating performance are positively and significantly related to the post-issue level of foreign ownership. The effects of domestic institutional investors such as family and business affiliations are insignificant. We empirically exclude the argument that the findings are due to sophisticated investment strategies or momentum propensity of foreign investors. To our knowledge, this result has not been previously documented.

Original languageEnglish
Pages (from-to)27-46
Number of pages20
JournalAsia Pacific Management Review
Volume14
Issue number1
Publication statusPublished - 2009 Mar 1

All Science Journal Classification (ASJC) codes

  • Business and International Management
  • Strategy and Management

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