Foreign equity ownership and information asymmetry: Evidence from Japan

Li Jiang, Jeong Bon Kim

Research output: Journal article publicationJournal articleAcademic researchpeer-review

84 Citations (Scopus)


Using a large sample of Japanese firms, we investigate whether the level of foreign ownership in a firm is inversely related to information asymmetry between firm (managers) and market (outside investors). Since information asymmetry is not directly observable and, thus, is difficult to measure empirically, our analysis focuses on the link between foreign shareholding and a measurable consequence of information asymmetry; that is, the timing and magnitude of intertemporal return-earnings associations. The empirical results support our hypothesis, and subsequent tests based on residual foreign ownership show that the relation between foreign ownership and information asymmetry is robust to the addition of various control variables such as market capitalization and cross-corporate holdings. We also show that foreign investors tend to avoid stocks with high cross-corporate holdings. Overall, our results suggest that foreign (institutional) investors are likely to be efficient processors of public information and are attracted to Japanese firms with low information asymmetry. 2004.
Original languageEnglish
Pages (from-to)185-211
Number of pages27
JournalJournal of International Financial Management and Accounting
Issue number3
Publication statusPublished - 1 Dec 2004

ASJC Scopus subject areas

  • Accounting
  • Business, Management and Accounting (miscellaneous)
  • Finance


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