Law, culture and investment performance: A cross-country analysis

This study investigates the investment performance of U.S. investors in foreign equity markets with different law origins and cultural characteristics and the investment performance of foreign investors in the U.S. markets. The finding is consistent with the information asymmetric hypothesis that investors perform better in foreign countries which have a similar legal system and cultural characteristics to their home markets than in counterparty countries. Differences in country-specific factors create information asymmetric barriers which slow information flow and result into poor investment performance.