Executives' US Background, Analyst Following, and Institutional Holdings: Evidence from Foreign Companies Listed in the US

Abstract

Foreign firms that list on US stock exchanges face serious information frictions to attracting investors and analysts due to the considerable institutional and cultural differences between their home countries and the United States. This dissertation investigates whether having top executives with US backgrounds (i.e., US educational background and/or AICPA membership) help US-listed foreign firms to reduce information frictions, and thus attract more analysts and institutional investors.

I examine the differences between foreign firms’ home countries and the US and find that the foreign firms from countries with greater institutional and cultural “distance” from the US are more likely to have US-educated executives, suggesting that the further the foreign firm is from the US, the harder it works to overcome information frictions. Then, I use
cross-sectional levels and time-series change analyses to examine the effect of top executives’ US backgrounds on analyst following/institutional holdings and find that foreign firms with top executives who have US backgrounds attract greater analyst following/institutional holdings. Further, I find that the beneficial effect of US-educated executives is stronger for foreign firms from home countries farther from the US.

Overall, the results suggest that executives with US backgrounds can help a US-listed foreign firm mitigate the information frictions, and to increase analyst following and institutional holdings. The results lead to a deeper understanding of the mechanisms that can help US-listed foreign firms to obtain international resources.

Date of Award	9 Nov 2016
Original language	English
Awarding Institution	City University of Hong Kong
Supervisor	Chansog KIM (Supervisor) & Cheong Heon YI (Supervisor)