Foreign-controlled Enterprises Research Articles

The Impact of ESG on the Financial Performance of Listed Companies: Empirical Analysis Based on A-share Listed Companies

As China’s ecological civilization advances, ESG (Environmental, Social, and Governance) has emerged as a focal point for market participants and investors. Based on the data of Shanghai and Shenzhen A-share listed companies from 2014 to 2022 and Bloomberg ESG score, this paper explores the impact of ESG performance on corporate value and its mechanism through multiple regression analysis. The results indicate that an enhancement in ESG performance significantly boosts the financial performance of listed companies, particularly in non-polluting industries, enterprises with low information transparency, and foreign-controlled enterprises. In response to these conclusions, the article makes recommendations for policy formulation and business management aimed at promoting sustainable development of enterprises, enhancing market competitiveness, and responding to the growing concern of investors about ESG.

Impact of dividends and capital intensity of labour on real wages in post-communist economies

This paper aims to verify gains and losses from foreign direct investment as well as outflow of capital in the form of dividends from Central and Eastern Europe. The topic of dividend outflow is currently at the centre of political as well as media interest. At the same time, it is prone to simplistic interpretations and possible political intervention might exert a significant negative social impact. The contemporary economic theory and empirical research are in relative consensus on the positive effects of foreign investment. Most notably, it increases capital endowment of labour. However, the questions that have not yet been resolved are the rate of intensity, phases and channels of foreign capital flows. The effect of foreign investment during the different phases of foreign life-cycle is practically unexplored. The need for this type of research does not arise in Western Europe’s economies as they are in a position of creditor compared to Central and Eastern Europe. Therefore, the article examines whether the outflow of dividends is associated with the deterioration of aggregate demand or an increase of export capacities. Through the panel regression method, these relationships are captured in Western Europe’s economies and compared with the Central and Eastern Europe’s economies. The effect of capital intensity and dividend outflow on real wages in the post-communist countries was examined. The findings break down the myth portrayed in the media concerning the cost of dividend outflow and, on the contrary, they confirm substantial benefits stemming from the capital inflow. Late stages of foreign investment cycle connected with dividend outflow do not bear any adverse effects. The high profitability of foreign-controlled enterprises is in line with the favourable wage development of domestic labour force.

The dependent Industry 4.0 development path of the Visegrád countries

The dependency of the Visegrád countries on foreign direct investment has been emphasized in the typologies of capitalist models. Today, the question is whether this development path can be sustained. In past years democratic backsliding and a change towards more inward-looking policies have taken place in this region that may also change their attractiveness to foreign investors. The general slowdown in capital flow can weaken the dependency of these countries on FDI, but the fourth industrial revolution can conversely strengthen it. Based on interviews we conducted with business and academic experts in the Visegrád countries, it is shown that the implementation experiences of Industry 4.0 point to the reinforcement of the duality of firm-level developments and dependency on foreign-controlled enterprises. Therefore, we argue that the FDI-based economic growth path of the Visegrád countries has led to the development of FDI-led industrial transformation.

In times of crisis does ownership matter? Liquidity extraction through dividends during the 2007–2009 financial crisis

Liquidity flow between regions with different levels of temporary financial constraints has received insufficient attention. This study takes advantage of a natural opportunity: Chinese capital markets clearly distinguish between foreign direct investment firms and firms with foreign institutional investment. Using the distinctive categorization of institutional holding structures in China, we find that foreign controlled enterprises were associated with an extraordinary increase in dividend payouts during the Global Financial Crisis, with concomitant underinvestment. Our results suggest that foreign-controlling shareholders extracted liquidity through dividends, highlighting a previously ignored channel for global transference of liquidity, with concomitant agency costs.

Do taxes affect number of foreign enterprises controlled abroad by Slovak companies in the age of globalization?

Research background: Globalization has so far brought the possibility of international trade as well as the possibility of establishing companies abroad. Countries see a number of benefits in attracting foreign enterprises. However, the question arises about how countries may affect the number of enterprises established by domestic companies abroad? Purpose of the article: The aim of this article is to find out whether corporate income tax rates have an impact on establishment of foreign controlled companies by Slovak companies abroad. Secondly, the aim of the work is to uncover whether trading across borders (which represents globalization), may influence the decision-making of such companies. To verify this, two groups of countries were created: one with a lower and the other with a higher average corporate income tax rates compared to the average rates in the Slovakia. The hypothesis is that paying taxes plays negative role in the number of foreign controlled enterprises by Slovak companies. Methods: To estimate the hypothesis, the panel regression analysis is applied. Findings & Value added: The results of the work may help in policy making decisions aimed at monitoring of foreign controlled companies from the Slovak republic. The findings reveal that taxes might not be the best, and at the same time the results reveal different area that may affect the establishment of such companies – namely trading across borders.

WHO AVOID TAXES? AN EMPIRICAL STUDY FROM THE CASE OF INDONESIA

This paper investigated the propensity and the magnitude of tax avoidance risk exposure among different taxpayers by analyzing both enterprise-related and government-related variables. Providing far-reaching analysis and examining a relatively unexplored area of conforming tax avoidance, this study employs two measurements of tax avoidance including non-conforming and conforming tax avoidance. In the brain area of empirical analysis, this paper combined a fixed-effect model to control omitted variable bias together with adoption of heteroskedasticity and autocorrelation-consistent standard errors (HAC/clustered SE). The results depict that the magnitude of tax avoidance risks varies depending on the characteristics of taxpayers. Higher risks were found in so-called foreign-controlled enterprises and foreign invested enterprises. With respect to entities’ sector, this study also demonstrates that the propensity of higher risk exposure was depicted in financial and mining sector relative to full sample taxpayers.

Perspectives of Ecological Footprint in European Context under the Impact of Information Society and Sustainable Development

The perspective of ecological footprint, which is a tool for measuring and monitoring the sustainability of the new information society and the higher degree of openness in the European economy powered by the globalization process, was approached from the viewpoint of accelerated technical, scientific, and innovative progress. This research aims at identifying and forecasting patterns of environmental footprint behavior in European countries, depending on factors reflecting the innovation activity, the degree of economic freedom, and EU membership status. In the article, three factors are identified that explain to a large extent the variation of the ecological footprint values: employment in foreign controlled enterprises, eco-innovation index, and region. The statistical and econometric methods used in the analysis are aimed at applying a Proportional-Odds Cumulative Logistic regression model in order to verify the existence of the association between the statistical variables and to forecast the likelihood of changing the ecological footprint from a lower to a higher score under the impact of selected factors by quantifying their influence. The results have led to the conclusion that, by applying the model, both the share of the employed population in the foreign-controlled enterprises and the eco-innovation index will have a significant direct influence on the variability in the ecological footprint (through the odds-ratio). Referring to the EU membership, the model shows that non-EU member countries or newer EU member countries are predominantly assigned low ecological footprint scores.

Multinationals and Reallocation: Productivity Growth in the Canadian Manufacturing Sector, 2001–2010

The article examines the role of multinationals and reallocation in productivity growth in the Canadian manufacturing sector in 2001–2010. It finds that foreign-controlled enterprises were more important than domestically controlled enterprises in overall labour productivity growth for 2001–2010, but the contribution of foreign-controlled enterprises declined after 2006 as a result of an increase in the exits of large and productive foreign-controlled firms during that period. Restructuring in the manufacturing sector intensified after 2006. During 2006–2010, there was an increase in reallocation to enterprises that are more productive and an increase in reallocation of labour to industries that are more capital and intermediate input intensive. The effect of new enterprises displacing exitors also increased after 2006, mostly because of the increased effect of domestic entrants displacing exitors while the effect of foreign entry and exit declined. Offsetting those positive effects of reallocation on labour productivity growth is the negative effect of reallocation of labour to the firms with lower relative capital and intermediate intensities within the same industries. Finally, the article finds that the decline in labour productivity growth after 2006 was partly due to a decline in the productivity contribution of foreign-controlled enterprises as a result of an increase in the exits of large and productive foreign-controlled firms during that period.

Foreign ownership and firm performance in German services

This study provides the first comprehensive analysis of foreign-controlled enterprises in the German service sector based on new micro-data from official German statistics. Various performance measures were examined via comparison of unconditional and conditional means and through use of quantile regression techniques. Foreign-controlled affiliates consistently performed better than German-owned affiliates. In contrast, profitability exhibited precisely the opposite trend. Moreover, labour productivity did not significantly differ when the comparison group consisted of domestically owned affiliates with a high degree of internationalization. A breakdown by country of origin showed that European affiliates pay lower wages and export less relative to non-European affiliates, and US firms have no productivity advantage as in manufacturing.

The performance of foreign affiliates in German manufacturing: evidence from a new database

This study presents the first investigation into the performance of foreign-controlled enterprises in German manufacturing, based on new micro-data from official statistics. A comprehensive set of performance variables is examined, not only by comparing unconditional mean values but also by accounting for other determinants and differences across distributions. The analysis reveals a foreign ownership performance premium with regard to productivity, research and development, export intensities, and average wages. Only profitability seems not to differ from German-owned enterprises. Results are verified by varying comparison groups of indigenous firms and separating for high- and low-tech sectors. Furthermore, a breakdown by country of origin and type of group head shows considerable heterogeneity within the group of foreign-controlled affiliates in Germany.

Wary managers: Unfavorable environments, perceived vulnerability, and the development of trust in foreign enterprises in China

Vulnerability is salient among international managers, who tend to be wary when operating in transition economies like China. Systematic research is lacking, though, on how the local environment influences foreign managers’ perception of vulnerability, and how foreign managers can develop trust even when their perceived vulnerability is high. We conducted in-depth case studies of two foreign-controlled enterprises in China, and developed a theoretical model that links perceptions of the macro-level environment to micro-level management. Our results illustrate the antecedents and consequences of perceived vulnerability and the processes of trust building in unfavorable environments. Through comparative analysis of the two cases, we found that the foreign managers’ perceived vulnerability was shaped by the institutional, technological, and market conditions of the local environment, and we learned how this perceived vulnerability influenced their trust in the local workforce and the joint investment in formal and social control they used in building trust. The effect of perceived vulnerability on trust was moderated over time when the implementation of control was combined with active investments in trust, which led to behavioral changes on the part of the local employees, which in turn increased their trustworthiness. The implications of these findings are discussed.

WARY MANAGERS/INVESTORS: VULNERABILITY, CONTROL, TRUST, AND DISTRUST IN FOREIGN ENTERPRISES IN CHINA.

Based on a comparative, ethnographic study of foreign-controlled enterprises in two different regions in China, we generate a causal and process model with propositions to analyze the recursive relationship between vulnerability, control, and the development of trust and distrust. The model proposed is relevant to organization theory and international management.

International transfer pricing and income shifting: evidence from the UK

The potential use of international transfer pricing (ITP) as an income-shifting mechanism by multinational enterprises (MNEs) has long been recognized. However, there is relatively little evidence to substantiate or discount this claim in relation to UK-based foreign-controlled enterprises (FCEs). This paper examines the possible use of ITP as an income-shifting mechanism by FCEs operating in the UK. The methodological approach involves the comparison of the profitability (performance) and dividend (post-performance) distributions of a sample of FCEs with those of UK-controlled enterprises (UKCEs) over a two-year period. The two samples are matched on the basis of their total assets (capability). Results reveal significant differences in the profitability and dividend distributions of the two groups. FCEs underperform UKCEs, but their level of dividend distribution outstrips those of UKCEs. Based on this sample of seventy-two companies, a firm is more likely to be an FCE, rather than a UKCE, if it reports a combination of lower performance and higher post-performance distribution. Evidence of significant income shifting by FCEs is confirmed and the claim that ITP is the key mechanism for such shifts cannot be dismissed.

Editorial: Assessing the Canada-U.S. Free Trade Agreement

January 1, 1998, will mark the ninth anniversary of the Canada-U.S. Free Trade Agreement (FTA). In its short life, this agreement has instigated major changes in the Canadian economy and had significant consequences for the conduct of Canadian and U.S. international trade policies. It now seems appropriate to ask: Has the FTA delivered on its promises? Without question, the economic policy context of the late 1990s is much different than that of the early 1980s, when initial interest emerged within Canada's policymaking bureaucracy for negotiating freer trade with the United States. A fair assessment of the FTA requires consideration of this context and the goals the two nations established for their experiment in continental integration. The Historical Context In early 1980s, the Internet, office faxes and personal computers, and such private delivery services as Federal Express were only emerging as ordinary features of business life. Globalization, then, was not seen as a compelling force. Protection and industrial policy were still viewed by some significant policymakers and intellectuals in the developing world, parts of Europe, Australia, and Canada, as viable options for guiding national economic development. Free trade and reliance on markets had not emerged as the new orthodoxy for coping with the accelerating pace of technological progress and the intensifying competitive pressures posed by industrialization in East and Southeast Asia. From the 1940s through about 1960, the Canadian economy had been powered by the rapid development of mineral resources and other natural resource exports to the United States. After 1960, the combined contribution of mineral, petroleum, farm, forest, and fishery products to Canadian exports to the United States declined significantly, and the attention of policymakers increasingly turned to Canada's manufacturing. (1) From the early 1960s to about 1980, federal and provincial governments experimented with a number of trade and industrial policies. Examples include high import tariffs on secondary manufactures, subsidies for industrial modernization and new product development, strategic targeting of government procurement, product standards and professional licensing requirements favoring Canadian suppliers, aggressive regulation of foreign-controlled enterprises, and limitations on foreign ownership in key sectors such as oil and gas. These policies were intended to reduce Canadian dependence on the U.S. markets and improve the competitiveness of Canadian manufacturing. Ultimately, they failed--as of 1980, the United States still accounted for 64 percent of Canadian exports and Canadian manufacturing productivity was estimated to be 77 percent of U.S. levels. (2) In 1979, the Tokyo Round of Multilateral Trade Negotiations (MTNs) was completed and there Canada agreed to cut tariffs substantially in eight increments from 1980 to 1987. Policymakers in Ottawa believed that tariffs would no longer be sufficient to protect Canadian manufacturing from U.S. competition; yet, in key industries, they believed U.S. tariffs and nontariff barriers could still block important Canadian exports. Moreover, the increasing reliance by the United States on contingent protection--that is, the case-by-case application of supplemental duties when U.S. producers were found to be injured by subsidized or dumped Canadian imports--was seen as a real threat to investment in Canada. After all, many Canadian and American firms receive some help from federal, state, or provincial governments to build new or modernize existing facilities. Why should U.S. or Canadian multinational corporations invest in Canada if they risk losing the U.S. portion of the North American market by the sudden application of punitive U.S. duties? Conversely, to Canadian internationalists, the appropriate response was to negotiate a free trade agreement that would eliminate remaining U. …

Good for the gander? foreign direct investment in the United States

As recently as 1978, C. Fred Bergsten, Thomas Horst, and Theodore Moran were able to address the most urgent issues linking U.S. welfare and direct investment in a book called American Multinationals and American Interests.' A decade later, the focus of policy attention had shifted almost completely. Scores of books and articles attempted to interpret the flow of incoming foreign direct investment (IFDI) that raised the 2.1 percent share of the U.S. nonfinancial corporate assets held by foreign-controlled enterprises to 10.6

Some Issues in Canada-US Trade Relations

Moreover, separable trade policy issues arise in the context of the overall or general policy or attitudes of the two national governments concerned. As well, each of the two administrations sees issues created by the other within the policy framework which is believed to exist. In the US view, the present policy emphasis in Washington is to remove some of the restrictions on the free play of market forces in the belief that economic growth and higher incomes will result from less governmental interference. As seen from Washington, Canadians are heading in a different direction. They appear to favor more, not less, intervention by government in the market and to be activated by a considerable distrust of the business community's competence, judgement or ability to work.toward social goals. Moreover, Americans feel at present that Canadians seem to be content to favor Canadian enterprises in Canada as against foreign-controlled enterprises, particularly in the oil and gas industries. Many Canadians in the private sector would not violently disagree with these perceptions. Many others, however, would emphasize the uniqueness of the Canadian situation, particularly the high degree of US ownership of enterprises in Canada, and, in more general terms, the asymmetry in the working of many bilateral and multilateral agreements between Canada and the US because of the differences in economic and political power. Pursuit by the US of its interests is not perceived by this group in Canada as being necessarily benevolent or benign. A most useful way to at least open a discussion about trade policy issues between the two countries is to draw attention to some underlying trends or important tendencies which, whether they are specific or pervasive, have to be recognized. Four particular issues stand out: the rise of a commercial policy based on 'contingent' or flexible protection, as compared to the more conventional and more stable system based on the use of the tariff; the critical role of government procurement in many sectors of production, particularly in Canada, and the rise of protectionism in regard to such procurement; the increasing reliance by Canada on 'performance requirements' (for example, under the Canada-US Automotive Products Agreement, under the Foreign Investment Review Act (FIRA), under the National Energy Policy (NEP), and in relation to some areas of government purchasing) which depart drastically from the concept of 'national treatment'; and finally, as a more general issue which cuts across many others, the problem of whether or not the nationality of the ownership of a corporation should be relevant for economic policy in general, and for trade relations and trade policy in particular.

Spatial Perspectives on United Kingdom Investment in South Africa

Abstract The geographical study of multinational corporations in Africa is a neglected area of research. In this paper the patterns of United Kingdom controlled enterprises in South Africa are examined from a spatial perspective. Spatially, enterprises are concentrated in the leading three metropolitan areas of which the national core area, the Pretoria-Witwatersrand-Vereeniging complex, is the most important. The overall pattern of United Kingdom enterprises is found to be positively associated with that of indigenous South African enterprises. It is suggested that observed spatial differentials between indigenous and foreign controlled enterprises primarily reflect differences in the structural characteristics of enterprises rather than differences in reactions to national space. The varying processes that shape patterns of foreign-controlled enterprise are illustrated by a case study of the changing geography of Lever Brothers manufacturing operations in South Africa.