Foreign Institutional Investment Horizon and Investment Efficiency in Emerging Markets

This paper examines whether foreign institutional investors’ investment horizon affects investment efficiency across 17 emerging markets. Using a sample of 10,360 firms, we find that long-term foreign institutional investors are associated with an enhancement in investment efficiency, particularly in firms susceptible to overinvestment and agency problems. We also show that the proximity advantage of local institutional investors in monitoring investment decisions does not extend to foreign institutional investors with a longer investment horizon in emerging countries