Corporations, Foreign Portfolio Investment And The Role Of Securities Market Regulation
My dissertation examines the effect of capital market regulations on the choices of firms and institutional investors in international financial markets. Chapter 1 asks whether opening China's capital market through the Qualified Foreign Institutional Investor (QFII) Scheme has resulted in a significant reallocation of foreign demand away from globally traded Chinese equities towards domestically traded equities. Using a unique dataset of 5,273 securities, I study differences in shareholdings across investors with and without direct access to China's capital market. I find that direct access is associated with a significant increase in A-sharebased exposure to China. Further, this entire increase represents incremental foreign demand rather than a reallocation of existing demand away from non-A-share equities towards A-shares. Domestically and internationally traded equities are mutually nonsubstitutable and China's capital markets remain segmented from global capital markets. Chapter 2 examines the firm-level determinants of QFII portfolio allocations and the effect of foreign ownership in Chinese listed firms on stock return volatility and stock return synchronicity. Using foreign institutional ownership and financial data for Chinese listed firms for 2003-2012 I find strong evidence that QFII portfolios overweight large firms, firms with low book-to-market ratios, high profitability ratios and high strategic investment by domestic long-term investors while underweighting firms with strategic ownership by controlling shareholders. Foreign ownership is not associated with any significant change in return volatility and is associated with a significant decrease in stock return synchronicity. Chapter 3 empirically examines the extent to which two alternative hypotheses - lossof- competitiveness and voluntary un-bonding - explain foreign deregistrations from U.S. equity markets by testing their predictions regarding the effect of deregistration on a firm's capital raising ability and operating performance. Using a dataset of 141 voluntary deregistrations from U.S. capital markets during 2002-2008 I find that deregistering firms are significantly more profitable and raise significantly lower capital relative to benchmark peers that did not deregister. Higher profitability in the aftermath of deregistration suggests that firms deregister to save the monetary costs of listing while lower capital raising in the aftermath of deregistration suggests that deregistration is perceived as a signal of lower protections for minority investors.
Li,Shanjun; Ng,David T.
Ph.D. of Agricultural Economics
Doctor of Philosophy
dissertation or thesis