The Foreign Investor Bias and its Linguistic Origins

We study how misaligned language between the investor and the firm contributes to the foreign investor bias. In particular, we document a significant US institutional investor bias against firms located in Quebec relative to firms located in the Rest of Canada (ROC). The differential bias is surprising given that Quebec and the ROC share the same country, federal law, stock exchange, accounting standards, and regulatory filings are prepared in both English and French; and given that US institutional investors are sophisticated investors at close geographic proximity to both Quebec and the ROC. We also contrast the bias of Quebec firms with different levels of French versus English online presence, and we contrast the bias of institutional investors located in the UK versus France, to bolster our conclusion that incongruent languages are a major source of bias