How Governance Indicators Affect Foreign Ownership in the Middle East Equity Markets

Abstract

The governance indicators of any country may reflect how safe is it to invest in its markets. The question is whether these indicators are being considered by foreign investors in the stock markets. A quantitative approach was used in this study to answer this question and explore how governance indicators can affect the size of the foreign ownership in the stock markets of the Middle East. The study covered the period from 2010 to 2019 excluding the time of financial crisis and the time of COVID-19. The collected data were analyzed using ordinary least squares method. Study results revealed that foreign investors in the stock markets of the Middle East do not consider governance indicators when taking their investment decisions because the foreign ownership in the equity markets was not affected by the governance indicators even when testing each country and each indicator individually.