Abstract
Despite the extraordinarily high ownership concentration widely observed in emerging market firms as a result of institutional voids, there is little research on how this high ownership concentration affects the exporting behavior of emerging market firms. From principal–agent and institutional perspectives, we hypothesize that high ownership concentration has a negative relationship with export intensity, because, in emerging markets, highly concentrated ownership bridges the interests of owners (principals) and managers (agents) so that principals must be prudent in exploring risky international markets. Moreover, we hypothesize that export country diversification strengthens the relationship between ownership concentration and export intensity, because broad geographic dispersion increases risk exposure and principal-agent problems. Empirical analysis based on a panel dataset for publicly listed firms in Peru from 2005 to 2014 supports the hypotheses. The study highlights the risk aversion attitude activated by ownership concentration, an attitude that protects emerging market firms from overconfidently exploring international business opportunities. The study extends the conventional literature on the interface between ownership concentration and international business in an emerging market context. We also discuss the generalizability of the findings to other emerging markets, e.g. China.
Highlights
The impact of corporate governance on the international business of firms is attracting increasing attention
Emerging markets have had an important impact on global business over the last 20 years (Bhaumik, Estrin, & Mickiewicz, 2017) and host 80% of the world’s population, but extensive studies on ownership concentration have mostly been done in the context of developed economies (Hoskisson & Turk, 1990), and the findings from such studies are not necessarily applicable to emerging markets (Young, Peng, Ahlstrom, Bruton, & Jiang, 2008)
In order to answer this intriguing question, we examine the exporting of firms with high ownership concentration in an emerging market context from the principal–agent and institutional perspectives
Summary
The impact of corporate governance on the international business of firms is attracting increasing attention. It is expected that the way in which ownership concentration affects emerging market firms will be influenced by their institutional environment, this has not yet been extensively examined (Gaur & Delios, 2015). The unique institutional environments of emerging markets provide a field in which to reexamine the impact of high ownership concentration on exporting. The conditions imposed by formal institutions in emerging markets are different from those imposed in developed economies, which have been extensively studied (Wright et al, 2005). The average of the three top owners reaches 80% of the shares This concentration is higher than the average concentration and it is higher than the average found in other emerging markets
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