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Foreign ownership, bank information environments, and the international mobility of corporate governance

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Abstract

This paper investigates how foreign ownership shapes bank information environments. Using a sample of listed banks from 60 countries over 1997–2012, we show that foreign ownership is significantly associated with greater (lower) informativeness (synchronicity) in bank stock prices. We also find that stock returns of foreign-owned banks reflect more information about future earnings. In addition, the positive association between price informativeness and foreign ownership is stronger for foreign-owned banks in countries with stronger governance, stronger banking supervision, and lower monitoring costs. Overall, our evidence suggests that foreign ownership reduces bank opacity by exporting governance, yielding important implications for regulators and governments.

Résumé

Cet article examine comment la propriété étrangère façonne les environnements d’information bancaire. En utilisant un échantillon de banques répertoriées dans 60 pays de 1997 à 2012, nous montrons que la propriété étrangère est associée de manière significative à une ‘informativité’ (‘synchronicité’) plus forte (plus faible) des prix des actions bancaires. Nous constatons également que les rendements des actions des banques sous contrôle étranger reflètent davantage d’informations sur les bénéfices futurs. En outre, l’association positive entre l’informativité des prix et la propriété étrangère est plus forte pour les banques à capitaux étrangers dans les pays où la gouvernance est renforcée, le contrôle bancaire renforcé et les coûts de surveillance réduits. Dans l’ensemble, nos preuves suggèrent que la propriété étrangère réduit l’opacité des banques en exportant la gouvernance, ce qui aurait des conséquences importantes pour les régulateurs et les gouvernements.

Resumen

Este artículo investiga cómo la propiedad extranjera da forma a los entornos de información bancaria. Usando una muestra de bancos que cotizan en bolsa de 60 países en el periodo 1997-2012 mostramos que la propiedad extranjera está asociada significativamente con mayor (menor) informatividad (sincronicidad) en los precios de las acciones de los bancos. También encontramos que los rendimientos de las acciones de los bancos de propiedad extranjera reflejan más información sobre ganancias futuras. Adicionalmente, la asociación positiva entre la informatividad y la propiedad internacional es más fuerte para bancos de propiedad extranjera en países con gobernanza más fuerte, mayor supervisión bancaria, y menores costos de monitoreo. En términos generales, nuestra evidencia sugiere que la propiedad internacional reduce la opacidad bancaria mediante al exportar gobernanza, arrojando implicaciones importantes para los reguladores y los gobiernos.

Resumo

Este artigo investiga como a propriedade estrangeira molda os ambientes de informações bancárias. Usando uma amostra de bancos listados de 60 países ao longo de 1997-2012, mostramos que a propriedade estrangeira está significativamente associada a maior (menor) informatividade (sincronicidade) nos preços das ações bancárias. Também descobrimos que os retornos das ações de bancos de propriedade estrangeira refletem mais informações sobre ganhos futuros. Além disso, a associação positiva entre informatividade de preços e propriedade estrangeira é mais forte para bancos de propriedade estrangeira em países com governança mais forte, supervisão bancária mais forte e custos de monitoramento mais baixos. No geral, nossas evidências sugerem que a propriedade estrangeira reduz a opacidade de bancos ao exportar governança, gerando importantes implicações para reguladores e governos.

摘要

本文研究外国所有权如何影响银行的信息环境。我们用1997至2012年间来自60个国家的上市银行样本来显示外国所有权与银行股价的高信息度(低同步性)显著相关。我们也发现外资银行的股票收益能更好的体现未来盈利。此外, 在公司治理和银行监管更严及监管成本更低的国家里的外资银行, 外国所有权与股价信息度的正相关也更强。总体而言, 我们的结果显示外国所有权通过输出公司治理降低了银行的不透明度, 因此本文对监管者和政府有重要意义。

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Acknowledgements

We are grateful for helpful comments from two anonymous reviewers and the area editor for significant suggestions and help. We also thank Davide Avino, Jie Chen, Hans Degryse, Julian Franks, Simone Giansante (discussant), Marc Goergen, Liuling Liu, Jens Hagendorff, Khelifa Mazouz, Wei Song, Yuliang Wu, Jason Xiao, Tina Xu, Shuxing Yin, and Hong Zou, as well as participants at the 2016 Empirical Finance Group Conference (Cardiff). All remaining errors are our own.

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Authors and Affiliations

  1. Stuart School of Business, Illinois Institute of Technology, Chicago, IL, USA

    Yiwei Fang

  2. Gabelli School of Business, Fordham University, New York, NY, 10023, USA

    Iftekhar Hasan

  3. Bank of Finland, 00101, Helsinki, Finland

    Iftekhar Hasan

  4. University of Sydney Business School, Sydney, NSW, Australia

    Iftekhar Hasan

  5. University of Edinburgh Business School, Edinburgh, EH8 9JS, UK

    Woon Sau Leung

  6. Cardiff Business School, Cardiff University, Cardiff, CF10 3EU, UK

    Qingwei Wang

  7. Centre for European Economic Research, L7 1, 68161, Mannheim, Germany

    Qingwei Wang

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  1. Yiwei Fang
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  2. Iftekhar Hasan
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  3. Woon Sau Leung
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  4. Qingwei Wang
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Correspondence to Iftekhar Hasan.

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Supplementary information accompanies this article on the Journal of International Business Studies website (www.palgrave.com/journals).

Accepted by Lemma Senbet, Area Editor, 2 April 2019. This article has been with the authors for three revisions.

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Appendix

Appendix

See appendix Table 8.

Table 8 Variable definitions
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Fang, Y., Hasan, I., Leung, W.S. et al. Foreign ownership, bank information environments, and the international mobility of corporate governance. J Int Bus Stud 50, 1566–1593 (2019). https://doi.org/10.1057/s41267-019-00240-w

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