TY  - JOUR
AU  - Kim,Woochan
AU  - Sung,Taeyoon
AU  - Wei,Shang-Jin
TI  - How Does Corporate Governance Risk at Home Affect Investment Choices Abroad?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 13721
PY  - 2008
Y2  - January 2008
UR  - http://www.nber.org/papers/w13721
L1  - http://www.nber.org/papers/w13721.pdf
N1  - Author contact info:
Woochan Kim
KDI School of Public Policy and Management
Chungrangri-Dong Dongdaemun-Ku
Seoul Korea 130-868
E-Mail: wc_kim@kdischool.ac.kr

Taeyoon Sung
School of Economics, Yonsei University,
Shinchon-Dong 134, Seodaemun-Ku,
Seoul, Korea 120-749
E-Mail: tsung@yonsei.ac.kr

Shang-Jin Wei
Graduate School of Business
Columbia University
Uris Hall 619
3022 Broadway
New York, NY 10027-6902
Tel: 212/854-9139
E-Mail: shangjin.wei@columbia.edu
AB  - Disparity between control and ownership rights gives rise to the risk of tunneling by the controlling shareholder, and is prevalent in many emerging market economies and present in some developed countries. At the same time, international investors come from different countries whose home markets are characterized by varying degrees of control-ownership disparity. This paper studies whether this difference in investors’ home countries affects their portfolio choice in an emerging market. It combines two unique data sets on ownership and control in business groups, and investor-stock level foreign investment in Korea. A key finding is that, investors from low-disparity countries disfavor high-disparity stocks in Korea, but investors from high-disparity countries are indifferent. Moreover, investors from low-disparity countries became averse to disparity only after the Asian financial crisis. These results suggest that the nature of corporate governance in international investors’ home countries affects their portfolio choice abroad, and therefore that these investors should not be lumped together in the analyses of their portfolio choice.
ER  -