The Role of Culture Characteristics, Governance and Information Penetration in Foreign Portfolio Investment
Date Issued
2011
Date
2011
Author(s)
Yuan, Cheng-Da
Abstract
The Ph. D. dissertation is a collection of two essays on equity home bias, national culture characteristics and information technology. Chapter 1 addresses the role of national culture played in the cross-border investment. We first investigate the effects of various culture dimensions on foreign portfolio investment constructing gravity model. Our evidence indicates that various culture characteristics exert different impact on foreign portfolio holdings. We also incorporate cultural distance and it’s interaction with information distance to home bias. The empirical result suggests that culture distance have significant positive effect on equity home bias. Moreover, the information gap between originating country and destination country can increase the culture distance that discourages foreign diversification.
In Chapter 2, we examine the addressed issue of governance regime and information penetration on cross-border investment. The estimated result shows that better regulatory has a negative but insignificant effect on reducing home bias. Nevertheless, we further find that a country with greater governance appears to decrease cross-border investment bias under higher information penetration. This implies that information penetration can moderate the strength of the relationship between governance quality and home bias. The implication is that for a country tries to diversify internationally should devote themselves into developing better governance environment and information infrastructure.
Subjects
home bias
culture characteristics
gravity model
regulatory governance
information penetration
Type
thesis
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