Abstract
This research explores the influence of foreign ownership on non-financial public shareholding firms in the Amman Stock Exchange (ASE). The study involved an investigation into the connection between non-Jordanian ownership and the company growth opportunity, stock liquidity, leverage, dividend policy and business output. The results highlight that foreign ownership can provide improved corporate governance practices by playing a decisive role in increasing the growth opportunity and enhancing the firms’ market valuation, as measured by Tobin’s Q. Moreover, the findings indicate that companies with foreign board membership have better operating performance and higher firm value. The rewards were reaped by foreign investors based on their superior monitoring ability, which affects the decisions made and actions taken by management.
Highlights
Foreign ownership is one of the vital issues to be investigated extensively in accounting and finance literature
The results demonstrate that leverage and Tobin’s Q ratio (TQ) ratios are higher when more foreign ownership is involved, while size tends to be higher when foreign ownership is greater than 5%
This study recommends that Jordanian companies welcome even small improvements in the implementation of corporate governance at firm level
Summary
Foreign ownership is one of the vital issues to be investigated extensively in accounting and finance literature. There are mixed results regarding the role of foreign ownership in emerging markets. On the one hand, Li et al (2011) highlight that the emerging stock markets can benefit from the monitoring role played by foreign investors, while Baek et al (2004) demonstrate that businesses with a greater level of foreign ownership suffer less and observe a lower fall rate in the value of their shares. Bekaert and Harvey (2000) suggest that granting foreign investors access to the market may lead to the increased valuation of local companies, which introduce higher stock return volatility. Phung and Vy Le (2013) reveal that a monitoring role is not played if the degree of foreign ownership is not sufficiently concentrated
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