DISAGGREGATING FOREIGN INVESTOR INFLUENCE: DIRECT HOLDINGS, NVDRs, AND STOCK PRICE CRASH RISK IN THE THAI EQUITY MARKET

Abstract

This study examines the relationship between foreign ownership and stock price crash risk in Thailand's stock market from 2005 to 2024, with a particular focus on distinguishing between direct foreign ownership with voting rights and Non-Voting Depository Receipts (NVDRs) that offer economic exposure without governance power. Using panel data from 275 SET100 firms comprising 3,692 firm-year observations, we employ pooled OLS and firm fixed effects regressions, measuring crash risk via negative skewness (Ncskew) and down-to-up volatility (Duvol). Results reveal that under pooled OLS, NVDR ownership is significantly positively associated with crash risk, while direct foreign ownership shows no significant relationship, supporting the governance rights mechanism. However, these associations disappear under firm fixed effects, suggesting they primarily reflect cross-sectional differences rather than within-firm dynamics. We further investigate whether information asymmetry and stock liquidity moderate these relationships but find no significant moderation effects in either specification, contrasting with findings in other emerging markets. Our findings contribute to the literature by demonstrating that governance rights—not merely foreign presence determine the association between foreign capital and market stability. The results have important implications for policymakers designing capital attraction policies and for investors assessing risk differences between investment channels in emerging markets.