Foreign Investors Stock Preference: Do barriers to international investment exist in Indonesia?

The purpose of this study is to investigate the existence of barriers to international investment in Indonesia by examining whether foreign investors prefer specific firm characteristics. This research used sample from 198 active stocks traded in Indonesia Stock Exchange in 2010-2011. Regression analysis is employed to investigate the relationship of firm characteristics and foreign ownership. The result shows that foreign investors prefer firms with low dividend yield and high current ratio, meanwhile there is no evidence that foreign investors prefer large size, low leveraged, and low book to market firms. These findings imply that some information asymmetry barriers in Indonesia have reduced, meanwhile specific explicit barrier, high foreign dividend tax, still exists in Indonesia.