Impact of China’s Belt & Road Initiative (BRI) on International Institutional Investment: Winners and Losers among Pakistani Publicly Listed Firms

We investigate the impact of China’s BRI on international institutional investment in Pakistani public firms. The question of interest is whether the BRI was helpful in attracting international institutional investment in Pakistani firms in the presence of low government transparency about the BRI. We predict and find that, on average, Pakistani public firms did not experience significant growth in international institutional investment between the pre- and post-BRI periods. However, we find that international institutional investment increased for firms affiliated to business groups relative to non-affiliated firms between the pre- and post-BRI periods. We note that the results become stronger with higher level of groups’ diversification. Our finding of increased institutional investment for affiliated firms holds when we use 1-to-1 matched Indian firms as a control group. These findings suggest that international institutional investors prefer business groups in emerging economies as a source of opportunity to overcome the institutional void problem.