Foreign ownership and firm-level stock return volatility in Taiwan


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With the increasing presence of foreign investors and their importance in the stock markets, the authors investigate the effects of foreign ownership on stock return volatility by using Taiwanese firm-level data covering a period from 1994 to 2014. The results demonstrate that foreign ownership is negatively correlated with stock return volatility during the whole sample period, the so-called stabilizing effect. For the sub-sample test, this effect is the largest during the period 2002–2007, the years following Taiwan joins WTO. However, the stabilizing effect did not exist after the global financial crisis in 2008 and recent years. The results are also robust after correcting the potential endogeneity issue.

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    • Table 1. Summary data of Taiwan stock market
    • Table 2. Descriptive statistics and correlation coefficients
    • Table 3. Results of panel least regression (fixed effect)
    • Table 4. Results of GMM