Foreign institutional investors and corporate governance: A transaction cost perspective

Zulfiquer Ali Haider; Enrico Onali

doi:10.1016/j.frl.2026.109784

Foreign institutional investors and corporate governance: A transaction cost perspective

Zulfiquer Ali Haider^*, Enrico Onali

^*Corresponding author for this work

University of Bristol Business School

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Abstract

Taking a transaction cost perspective, we posit that foreign institutional investors will find it efficient to engage in active governance of firms to affect certain firm strategies, but not universally so. Using data on US firms from 2007 to 2018, we find that while foreign institutional investors in US firms positively influence the international diversification of investees, they are instead attracted to firms with better environmental performance; we also find that these relationships are potentially strengthened in the case of firms controlled by families.

Original language	English
Article number	109784
Number of pages	10
Journal	Finance Research Letters
Volume	96
Issue number	109784
Early online date	9 Mar 2026
DOIs	https://doi.org/10.1016/j.frl.2026.109784
Publication status	Published - 1 May 2026

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© 2026 Elsevier Inc.

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Foreign institutional investors and corporate governance: A transaction cost perspective

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