Foreign investor behavior in Korea after the 1997 Asian financial crisis

In this study, we investigate the behavior of foreign investors in the Korean stock market after the 1997 Asian financial crisis (1999–2014). We analyze the industrial distribution of foreign ownership and find that foreign investors hold fewer stocks in the manufacturing sectors than in the non-manufacturing sectors. We also find that foreign equity investments are concentrated in firms above a certain size. Moreover, foreign investors show a preference for large, profitable, highly liquid, and growth firms, as well as firms with large boards. However, after controlling for other firm-specific factors, we find that chaebol (Korean business group) firms are not more attractive to foreign investors than non-chaebol firms. Finally, we show that foreign investors achieve success as financial investors in Korea. (JEL F21, G11, G15)