6. Conclusion
FDIs are a key feature of the modern internationalized world. They produce benefits but increase agency costs. Accordingly, this study argues that FDIs exacerbate accounting information quality and worsen information asymmetry. The findings of this study are currently relevant because FDIs are markedly expanding and are critical because shareholder protection is receiving a lot of attention in the most recent decades.
Using data from Taiwan, this study applies a panel regression analysis with GMM and White’s estimation method to show that earnings management and information asymmetry increase with the amount of foreign investment. Low accounting quality and information asymmetry reduce stock pricing efficiency. However, managerial ownership mitigates earnings management and information asymmetry.
