Financial dimension of internationalization: serving two masters

Abstract

PurposeDrawing on the agency and institutional theory, this paper aims to explore how financial internationalization shapes firm performance through the influence of foreign actors.Design/methodology/approachBy using a unique panel database, composed of over 26,000 curricula and 4,000 corporate reports from approximately 450 Brazilian companies, the effects of financial internationalization were explored in a longitudinal view by using multiple regression analysis with fixed effects.FindingsThe results present consistent and non-trivial effects of financial internationalization on firms’s performance. When tested together, foreign ownership showed inconclusive results, foreign directors and depositary receipts showed a positive association with performance and foreign currency debt showed a negative association.Research limitations/implicationsIn most cases, the data on foreign stakeholders, foreign directors and foreign currency debt do not address the home country.Practical implicationsServing the interest of foreign stakeholders from multiple institutional perspectives can be a challenge for managers. The findings of this study provide an opportunity for research focusing on institutional duality and financial internationalization.Originality/valueThis paper extends the prior literature on corporate governance and financial internationalization by investigating the latter on a perspective of firms from an emerging market. The empirical evidence section provides support for the argument that the simultaneous presence of foreign actors in multiple mechanisms of the corporate governance structure impacts the performance of emerging market firms.