Foreign Institutional Ownership and Liquidity: Evidence from Thailand


  • Yordying Thanatawee


Foreign Ownership, Institutional Ownership, Liquidity, Thailand


This paper examines the impact of foreign institutional ownership on stock liquidity in a sample of 950 firm-year observations from 190 companies listed in the Stock Exchange of Thailand (SET), over the period from 2011 to 2015. Multiple regressions were used to examine the relationships between foreign institutional ownership and liquidity measures. Two-stage least squares (2SLS) were also employed to ensure that the regression results were not susceptible to endogeneity problems. After controlling for price, return volatility, and firm size, the results indicated that equity ownership by foreign institutional investors has a negative impact on stock liquidity. The results remain robust even after controlling for endogeneity. The findings of this paper suggest that foreign institutional ownership may increase the degree of information asymmetry between foreign and local investors, and that foreign institutional investors adopt a buy-and-hold strategy following their high ownership in local firms. Both the higher information asymmetry and the inactive trading activity reduce liquidity.