Article ID Journal Published Year Pages File Type
963109 Journal of International Economics 2009 12 Pages PDF
Abstract
This study finds strong evidence that home bias affects firm valuation at both country and firm levels. At the country level, increasing the bias of domestic investors toward home equity lowers the market valuation of home equity. At the firm level, firm value increases as the compositions of local equities held by domestic and foreign investors tend toward the firms' global market capitalization weights, but decreases as their weights deviate from global weights. Overall, the evidence is consistent with the optimal global risk-sharing hypothesis that the greater risk sharing between domestic and foreign investors in international capital markets reduces the cost of capital and hence enhances market valuation.
Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
Authors
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