Paper Type

Complete

Abstract

This study examines how financial Application Programming Interfaces (APIs) differentially affect the trading behavior and outcomes of foreign versus domestic investors. Foreign investors have historically faced informational disadvantages due to the cost and complexity of accessing firm disclosures. The introduction of financial APIs standardizes and automates access to corporate data, reducing information acquisition costs. Leveraging the rollout of OpenDART in South Korea as a quasi-natural experiment, we analyze abnormal trading volume, net-buying activity, and cumulative abnormal returns to assess differential effects across investor types. We find that API adoption improves the trade quality of foreign investors, particularly for firms with greater opacity, whereas domestic retail investors exhibit deteriorating trade quality despite gaining identical data access. Our findings demonstrate that identical digital disclosure infrastructure can generate divergent outcomes across investor types, underscoring the role of users' pre-existing informational positions in shaping technology-mediated market behavior.

Paper Number

1765

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Aug 15th, 12:00 AM

Financial APIs and Foreign Investor Trading in Emerging Markets

This study examines how financial Application Programming Interfaces (APIs) differentially affect the trading behavior and outcomes of foreign versus domestic investors. Foreign investors have historically faced informational disadvantages due to the cost and complexity of accessing firm disclosures. The introduction of financial APIs standardizes and automates access to corporate data, reducing information acquisition costs. Leveraging the rollout of OpenDART in South Korea as a quasi-natural experiment, we analyze abnormal trading volume, net-buying activity, and cumulative abnormal returns to assess differential effects across investor types. We find that API adoption improves the trade quality of foreign investors, particularly for firms with greater opacity, whereas domestic retail investors exhibit deteriorating trade quality despite gaining identical data access. Our findings demonstrate that identical digital disclosure infrastructure can generate divergent outcomes across investor types, underscoring the role of users' pre-existing informational positions in shaping technology-mediated market behavior.

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