Department of Finance Lunghwa University,Department of Banking and Finance Kainan University
Abstract:
This paper questions and tests the issue of information advantage via observing the trading behavior of foreign and domestic institutional investors during the entire execution periods of open-market repurchases (OMR) in Taiwan. A credibility index (foresighted) is constructed to measure the false signal of OMR firms. We find that foreign institutional investors possess information advantage over domestic institutional investors. They buy companies with higher credibility, whereas domestic institutional investors can not distinguish between true and false signals, signifying that foreign institutional investors are sophisticated and possess specialized investment experiences. Besides, our finding that foreign institutional investors hold high credibility firms is because that those firms are linked with higher excess returns than firms with lower credibility.
