IMF Working Papers

Transparency and International Investor Behavior

ByShang-Jin Wei

October 1, 2002

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Shang-Jin Wei. "Transparency and International Investor Behavior", IMF Working Papers 2002, 174 (2002), accessed 12/8/2025, https://doi.org/10.5089/9781451858709.001

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Does country "transparency" affect international portfolio investment? We examine this and related questions using a unique micro dataset on international portfolio holdings. We employ various indices of government and corporate transparency, focusing on the availability and quality of information. We find that emerging market equity funds hold fewer assets in less transparent countries. Herding among funds is somewhat less prevalent in more transparent countries. During the Asian and Russian crises, emerging market funds withdrew more strongly from less transparent countries after controlling for other risk factors. However, funds tend to react less strongly to news from more opaque markets.

Subject: Accounting standards, Asset allocation, Asset and liability management, Emerging and frontier financial markets, Financial markets, Market capitalization, Public financial management (PFM), Stock markets

Keywords: Accounting standards, aggregate equity fund, Asset allocation, composite index, contagion, cost of capital, country asset allocation, Emerging and frontier financial markets, emerging market equity funds, emerging markets, financial crises, fund manager, Global, international financial architecture, international investors, investment behavior, Market capitalization, MSCI indices, portfolio investment, Stock markets, transparency, WP

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