The Impact of Foreign Ownership on the Stock Returns and Accounting Performance of the Listed Corporations in the Palestine Exchange

This paper, on the first hand, aims at exploring the influence of the individual, institutional foreign ownership and total foreign ownership (individual plus institutional) on the stock returns of the listed industrial corporations in the Palestine Exchange; PEX. On the second hand, it explores the impact of the individual, institutional foreign ownership and total foreign ownership (individual plus institutional) on the accounting performance. In order to achieve the previous objectives; this paper includes a sample from the financial data taken from the industrial listed corporations in the PEX from 2010-2014. This study employs a number of statistical tests (descriptive statistics, Pearson's correlation, and the simple linear regression tests). Eleven industrial listed Palestinian corporations were selected to examine the hypotheses [55firm-years]. The findings of this paper state that (1) There is a positive impact of individual foreign ownership on the financial performance (ROA) of the listed corporations in the PEX. (2) The individual foreign ownership affects the stock prices (returns) positively. (3) The analysis indicates that the institutional foreign ownership affects the profitability positively but statistically is insignificant. (4) The analysis indicates that the institutional foreign ownership affects the stock prices positively. (5) There is a positive impact of total foreign ownership on the profitability. (6) The total foreign ownership (individual plus institutional) affects the stock prices positively. Finally yet importantly, this manuscript strongly recommends the stakeholders in Palestine to consider the percent of foreign ownership for interpreting the profitability and stock prices. It also recommends the Palestine Exchange to encourage the foreign investors to invest in the listed corporations in Palestine. Thus, the foreign investors play a vital role in enhancing the performance of the listed corporations as proved by the findings of this paper. This point requires applying new regulation to improve the role of PEX in bringing better investment climate and confidence in Palestine listed companies.