TITLE

Do Foreign Investors Encourage Value-Enhancing Corporate Risk Taking?

AUTHOR(S)
Byungmo Kim
PUB. DATE
May 2011
SOURCE
Emerging Markets Finance & Trade;May/Jun2011, Vol. 47 Issue 3, p88
SOURCE TYPE
Academic Journal
DOC. TYPE
Article
ABSTRACT
This paper examines whether foreign investors in Korea affect incentives for firms to take risks in corporate investment. The short-term focus of foreign investors encourages managers to engage in conservative investment behavior. On the other hand, foreign investors encourage managers to focus on long-term value rather than short-term returns as active participants in corporate governance. These competing views are examined by testing for the association between foreign ownership and variations in corporate cash flow, a proxy for the risk of chosen investments. Furthermore, we examine whether risk taking is positively associated with firm growth, which is a primary concern in debates regarding the myopic behaviors of foreign investors. The results show that firms with high foreign ownership are less likely to avoid risk taking-and that risk taking is, in turn, positively associated with firm growth, implying that foreign investors perform a monitoring function in encouraging value-enhancing risk taking.
ACCESSION #
61988834

 

Share

Read the Article

Courtesy of THE LIBRARY OF VIRGINIA

Sorry, but this item is not currently available from your library.

Try another library?
Sign out of this library

Other Topics