Cross-border spillover of institutional activism: The monitoring role of locally-aggressive foreign institutional investors

Using data from 32 countries for the period 2008–2018, this study examines the previously unexplored monitoring role of foreign institutional investors that are aggressive monitors in their home markets. First, consistent with the short-termist view of cross-border activism spillover, we show that ownership by locally-aggressive foreign institutional investors is negatively associated with firm value. Second, using country-level investor protection and investment horizon, we find that the negative influence on value only holds for common-law and long term locally-aggressive foreign investors. Contrarily, we find that the association between foreign activists from civil-law countries and value is positive and consistent with the managerial-disciplining view of cross-border activism spillover. Findings for total foreign ownership and locally-acquiescent foreign ownership remain similar to those reported in previous studies. Our findings are robust to endogeneity concerns, multiple specifications, and alternative measures of monitoring aggression in home markets.