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http://dx.doi.org/10.13106/jafeb.2021.vol8.no1.007

The Impact of Foreign Ownership on Stock Price Volatility: Evidence from Thailand  

THANATAWEE, Yordying (Graduate School of Commerce, Burapha University)
Publication Information
The Journal of Asian Finance, Economics and Business / v.8, no.1, 2021 , pp. 7-14 More about this Journal
Abstract
This paper examines the impact of foreign ownership on stock price volatility in an emerging market, namely, Thailand. The data were obtained from SETSMART, the database of the Stock Exchange of Thailand (SET). After removing financial firms, banks, and insurance companies as well as filtering outliers, the final sample covers 1,755 firm-year observations from 371 nonfinancial firms listed on the SET over the five-year period from 2014 to 2018. The regression model consists of stock price volatility, measured by two methods, as the dependent variable, foreign ownership as the main independent variable, and firm characteristics including firm size, leverage, market-to book ratio, and stock turnover as the control variables. The pooled OLS, fixed effects, and random effects estimations are employed to examine the relationship between foreign ownership and stock price volatility. The results reveal that foreign ownership has a negative and significant impact on stock price volatility. The two-stage least squares (2SLS) are also performed to address potential endogeneity problem. The results still indicate a negative relationship between foreign ownership and stock price volatility. Taken together, the findings of this study suggest that foreign investors help reduce stock price volatility and thus stabilize share price in the Thai stock market.
Keywords
Foreign Investor; Foreign Ownership; Volatility; Thailand;
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