Are Foreign Investors Locusts? The Long-Term Effects of Foreign Institutional Ownership
نویسندگان
چکیده
In this paper, we challenge the view that foreign investors lead firms to adopt a shortterm orientation and forgo long-term investment. Using a comprehensive sample of publicly listed firms in 30 countries over the 2001-2010 period, we find instead that greater foreign institutional ownership fosters long-term investment in tangible, intangible, and human capital. Foreign institutional presence also leads to significant increases in innovation output. We identify these effects by exploiting the exogenous variation in foreign institutional ownership that follows the addition of a firm to the MSCI World indices. We find strong evidence of the disciplinary role that foreign institutions exert on entrenched corporate insiders worldwide. JEL classification: G31, G32, O32
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