Research On The Effects Of Foreign Ownership On The Operating Performance And Stock Price Volatility Of China Listed Company

Current economy and financial market globalization is pushing the China stock market open to the world. In recent years, China’s securities mark et regulators have introduced a variety of foreign policies to attract foreign capital. Foreign ownership can provide financial support, management experience, and technological innovation; But on the other hand, they may also bring short-term speculation and international risk which is not conducive to the company.This paper studies the relationship between foreign ownership and operating performance and stock price volatility. The study period is from January 2011 to September 2015, and we use a fixed effects model to conduct the research. Additionally, we also divide the foreign shareholder into institution and individual, use domestic institution and individual as control variables to check whether the effect of different investors is different betwee n foreigner shareholders and domestic shareholders. Furthermore, we also use the non-parametric method suggested to divide the market into bull-bear markets and examine check whether the effect changes in different market condition.Our result shows that foreign shareholding is significant positively correlated with companies’ operating performance, and negatively correlated with stock price volatility. The different effect among different types of investors on companies’ operation performance are significant, but insignificant on stock price volatility, foreign institutional shareholding is significant positively correlated with companies’ operating performance, while foreign personal shareholding is uncorrelated with companies’ operating performance, foreign institutional shareholding and foreign personal shareholding are negatively correlated with stock price volatility. We also study the relationship under different market conditions and find that differences are also significant in different market conditions. Our paper reveals the relationship between foreign ownership and companies’ operating performance, stock price volatility, which will provide government regulators some insights when making policies so as to achieve the goal of improving foreign capital quality.