The impact of international equity portfolio diversification on financial development, country-level institutional quality and cross-border mergers and acquisitions
| dc.contributor.author | Wonu, Chizindu Ntuta | |
| dc.date.accessioned | 2023-04-24T09:49:15Z | |
| dc.date.available | 2023-04-24T09:49:15Z | |
| dc.date.issued | 2023-03 | |
| dc.description.abstract | Prior finance literature has extensively explored the importance of financial market development, country-level institutional quality, and cross-border mergers and acquisitions, respectively. However, despite the benefits of foreign investors in both developed and developing countries (Colombo, Loncan, and Caldeira, 2019), their relevance as the determinants of financial market development, country-level institutional quality, and cross-border mergers and acquisitions has not been thoroughly examined by scholars. Thus, the purpose of this thesis is to investigate the impact of foreign equity portfolio diversification on financial development, country-level institutional quality, and cross-border mergers and acquisitions, which led to the formation of the three research empirical studies. This study employs the panel data approach in 49 countries over the period from 2001 to 2016. The regression models derived from the developed hypotheses were analysed by using several econometric estimations such as the ordinary least square (OLS), fixed effect (FE), Newey-West, system generalized method of moments (SGMM), difference-in-difference (DiD), and propensity score matching (PSM). The Stata statistical analytical software is considered appropriate for this study and has been used to perform all the analyses. In the first empirical study, we investigate the impact of foreign equity portfolio allocation on financial market development. Following prior studies, we utilised three main proxies for financial development (MCGDP, PSCGDP, and DCPGDP) in our study to test hypotheses H1, H2, and H3. Our results suggest that foreign equity portfolio diversification promotes financial development. Moreover, we also find compelling empirical evidence which shows that the moderating effects of both economic freedom and central bank transparency complement the global equity portfolio flow to foster financial development in the host country, respectively. The second empirical study explores the impact of international equity portfolio diversification on country-level institutional quality. We employ four proxies for institutional quality (RLAW, COC, GOVEFF, and REGQUAL) in carrying out the analysis for hypotheses H4, H5, and H6. The results indicate strong evidence which suggests that international equity portfolio diversification is significantly and positively associated with country-level institutional quality. Furthermore, our findings indicate that the interaction terms of central bank independence and the stock market's total value traded per GDP boosts the quality of institutions in the host nation. Finally, our third empirical study examines the role of global equity portfolio flow on cross-country mergers and acquisitions. We use two main proxies of mergers and acquisitions (ADEAL and TDEAL) to test hypotheses H7, H8 and H9. Interestingly, our results demonstrate that the worldwide equity portfolio flow increases international mergers and acquisitions in the host country. We also find that the interaction terms of foreign equity portfolio flow and domestic credit to the private sector per GDP is associated with a higher volume of cross-border mergers and acquisitions transactions. Additionally, we find that the moderating effect between stock market turnover ratio and international equity portfolio flow enhances cross-country mergers and acquisitions. In all the three empirical chapters, our findings remain statistically and economically robust after employing several alternative specifications and batteries of robustness tests. This thesis contributes to the ongoing debate in the corporate finance literature in the areas of international equity portfolio diversification, financial development, institutional quality, and mergers and acquisitions. Our results have significant implications for policymakers, regulators, practitioners, and researchers in understanding the determinants of financial development, country-level institutional quality, and cross-border mergers and acquisitions transactions, respectively. | en |
| dc.identifier.uri | https://hdl.handle.net/2086/22739 | |
| dc.language.iso | en | en |
| dc.publisher | De Montfort University | en |
| dc.publisher.department | Faculty of Business and Law | en |
| dc.title | The impact of international equity portfolio diversification on financial development, country-level institutional quality and cross-border mergers and acquisitions | en |
| dc.type | Thesis or dissertation | en |
| dc.type.qualificationlevel | Doctoral | en |
| dc.type.qualificationname | PhD | en |