Level Of Foreign Ownership Research Articles

The Impact of Foreign Investors on the Risk-Taking of Japanese Firms

Consistent with a bank-centered governance system, Japanese firms exhibit an exceptionally low level of performance variability. The increased involvement of foreign investors motivated by shareholder value is thus likely to have triggered a major shift in their risk-taking behavior. My results confirm this hypothesis as the volatility of stock returns, market-to-book value, and profitability is found to have significantly increased with the level of foreign ownership. Controlling for endogeneity provides higher point estimates supporting anecdotal evidence that foreign investors have targeted firms taking unusually low risk. Overall, the evidence highlights the considerable impact that this category of investors can make on a firm’s decisions and, by extension, on its performance.

Post-earnings announcement abnormal return in the Chinese equity market

This study examines the profitability of trading on earnings surprises in the post-earnings-announcement period in the Chinese stock market from 1994 to 2009. We find that a post-earnings-announcement drift (PEAD) anomaly exists in China. When earnings surprise is defined relative to analyst forecasts, a hedge strategy of going long the top quintile of earnings surprise stocks and short the bottom quintile of earnings surprise stocks can generate around 9.5% excess return in 1 year following the earnings announcements. When earnings surprise is defined relative to time-series model forecasts, a hedge strategy of going long the top quintile of earnings surprise stocks and short the bottom quintile of earnings surprise stocks can generate around 9% excess return in 1 year following the earnings announcements. The return from trading on earnings surprise is robust to the inclusion of beta, firm size, book-to-market ratio, momentum, liquidity and transaction cost measures, state ownership, cross-listing and accounting standards. There is evidence that the magnitude of PEAD increases in the level of arbitrage risk and decreases in the level of foreign ownership. We also find that PEAD is strongly related to firms’ future financial performance.

Foreign Ownership and Stock Market Liquidity Evidence from Vietnam

This paper investigates the relationship between level of foreign ownership in a firm and the liquidity of the firm stock in the Vietnam stock markets. We employ a rich and detailed data set representing foreign portfolio investment, liquidity and other firm attributes in the Vietnamese context. Our data set ranges from 2006 to 2012 covering most of non-financial firms listed on Ho Chi Minh City stock exchange. Using a wide number of econometric techniques for panel data analysis, the results from our analysis indicate that increased foreign investment in firms does not associated with higher liquidity. The results also confirm the long term buy and hold strategy of foreign investors in Vietnam stock market.

Ownership structure, corporate governance and bank performance: Evidence from GCC countries

The paper examines the effect of ownership structure and board characteristics on bank performance of GCC counties. Evidence indicates that the extent of the foreign ownership level has a significant positive association with the bank performance. However, concentrated ownership does appear to have a significant negative impact on performance and institutional ownership does not have any significant effect on performance. Other governance variables such as CEO duality and board size appear insignificant impact on performance. These results suggest a need to strengthen the internal control mechanisms within banks of GCC countries.

The effect of foreign ownership on SMEs performance: An efficiency analysis perspective

This paper uses both Data Envelopment Analysis (DEA) and Free Disposal Hull (FDH) models in order to determine different performance levels in a sample of 353 foreign equities operating in the Greek manufacturing sector. Particularly, convex and non-convex models are used alongside with bootstrap techniques in order to determine the effect of foreign ownership on SMEs’ performance. The study illustrates how the recent developments in efficiency analysis and statistical inference can be applied when evaluating performance issues. The analysis among the foreign equities indicates that the levels of foreign ownership have a positive effect on SMEs’ performance.

The National Question in Canadian Development: Permeable Nationalism and the Ideological Basis for Incorporation Into Empire

The contradictory character of Canadian nationalism distinguishes it from the nationalisms of other advanced capitalist countries in both content and form. Nationalism in Canada has been constructed in a more associative than dissociative manner in relation to the British and American Empires.1 As in other advanced capitalist countries, the national question in Canada is intertwined with the accumulation strategy pursued by the ruling bloc. The Canadian ruling bloc has had a long history of co-existing, facilitating, and profiting from foreign investments. How has it been able to manage and prevent a popular response to high levels of foreign ownership and continental integration? In this paper, I argue that in the historical formation and articulation of permeable nationalism2 has been an important ideological tool used to support and stabilize the deep integration agenda. Viewed from our perch in 2010, it becomes clear that the popular-nationalist interlude from 1967 to 1984 stands out as an exceptional period of Canadian history.

How Important are Foreign Ownership Linkages for International Stock Returns?

We develop a simple measure of international ownership linkages and show that this measure is of similar importance as the traditional effects coming from country and industry fundamentals. International ownership linkages are not explained by omitted country/industry variations, wealth effects or other explanations like liquidity, investment style, or fund flows. We find that ownership linkage is a summary measure of investment locale that links investor capital around the world. Beyond the level of foreign ownership, the specific ownership composition of a stock is an important facet of international equity returns – a finding which has important implications for diversification.

Control, collaboration, and productivity in international joint ventures: theory and evidence

AbstractThis study analyzes the following unresolved questions: In international joint ventures (IJVs) in a developing country, how could different IJV structures address control and collaboration considerations, and what is the likely effect of such different structures on IJV productivity? Theoretically, we suggest that the ambiguity surrounding these questions reflects the tendency of researchers to view control and collaboration as opposing objectives, studying one or the other; in contrast, we provide a more integrative perspective that blends the two objectives, focusing on common underlying issues relating to enhancing partner commitment, ensuring partner knowledge contributions, and reducing partner risks. We address the most salient design consideration for IJV partners, that is, IJV ownership structure, to posit that joint consideration of the control benefit of a higher foreign ownership level in IJVs and the collaboration benefit of a more balanced IJV ownership structure results in an expected inverted U‐curve relationship between foreign ownership and IJV productivity. Additionally, we posit and test how three environmental contingencies, by affecting the need for control and collaboration in IJVs, would further influence the specific shape of the inverted U‐curve relationship. We find strong support for our theory using an extensive longitudinal dataset of over 5,000 IJVs in China from 1999–2003. We discuss the value of our approach and findings both for researchers and for IJV partners seeking the dual benefits of control and collaboration. Copyright © 2009 John Wiley & Sons, Ltd.

Corporate Governance and Long-Run Performance of Equity Issues: The Role of Foreign Ownership in Taiwan

It is widely argued that foreign shareholding is a mechanism for improving corporate governance in emerging markets. We provide the evidence of the monitoring benefits of foreign ownership of equity issues, a setting where we argue the effects of monitoring are likely to be important. We analyze the relationship between foreign ownership and stock price, as well as operating performance following public equity issues, by using a sample of Taiwanese firms conducting seasoned equity offerings (SEOs) from 1991 to 2002. Empirical results show that post-issue stock returns and changes in operating performance are positively and significantly related to the post-issue level of foreign ownership. The effects of domestic institutional investors such as family and business affiliations are insignificant. We empirically exclude the argument that the findings are due to sophisticated investment strategies or momentum propensity of foreign investors. To our knowledge, this result has not been previously documented.

Impact of foreign ownership on innovation

Abstract On the basis of longitudinal data for a sample of 1267 Spanish industrial firms over a period of 5 years, this paper analyses the impact of foreign ownership concentration on the firm's innovation performance. To that end, the study investigates how the level of ownership affects the firm's new product development. The results reflect no significant differences between the innovation of foreign‐owned firms and that of domestically owned firms. However, the results reveal that up to a certain level of foreign ownership, the lower possibility of appropriation of rents has a negative effect on innovation, while above that level of foreign ownership, the possibility of appropriating those rents increases the firm's innovation performance.

The social context in conditionality: internationalizing finance in postcommunist Europe

When it comes to embracing the European Union's vision of building a fully integrated financial market, central and east Europeans have far out-performed their west European counterparts. This paper addresses not only why levels of foreign ownership in banks are on average so much higher in Central and Eastern Europe (CEE) than in Western Europe, but also why there is variation among CEE states in how willing they have been to accept those high levels of foreign ownership. I develop a theory of international institutional influence on target states that suggests compliance with international institutions' conditionality and advice depends on the existence of a particular social context. I test the argument in five post-socialist states: Poland, Hungary, Romania, Slovenia and Ukraine.

Applying the 'Specificity' Test in the Context of Foreign Investment Policies of China

The confirmative determination on the specificity of China's Investment-Inducing Policy - the Two Free/Three Half program raises several technical questions about how to clarify the specific requirement provided by the U.S. CVD law and the WTO SCM agreement. The determination also has broad policy implications for China, India, Vietnam, Laos and other developing countries that adopt the similar investment-inducing policies. The examination of the negotiation history shows that the negotiators wanted to put a more stringent discipline on sector-specific subsidies. Moreover, if we accept that incentives given to foreign investment enterprises are countervailable, it will be inconsistent with the common practice adopoted by the WTO system with respect to foreign investment policies. The level of foreign ownership alone cannot determine the specificity of a subsidy. Thus, extending the CVD application to those foreign investment policies raises concerns as to how much room developing countries have in their policymaking for social and economic development. It turns out any careless manipulation of the specificity test will inappropriately restrict the state autonomy on the policy-making in the area of investment encouragements, which will undermine the long run of multilateral trading system.

Increased presence of foreign investors and dividend policy of Japanese firms

This paper investigates the impact of the increased presence of foreign investors on the dividend policy of Japanese firms. A choice-to-pay model, estimated with a random-effects binary probit method, shows that a higher level of foreign ownership is associated with a significantly higher probability of dividend payouts. A choice-to-change model, estimated with a random-effects generalized ordered probit method, shows that a higher level of foreign ownership is associated with a significantly higher (lower) probability of an increase (no change) in dividends, while a larger 1-year increase is associated with a significantly higher (lower) probability of an increase (decrease).

Foreign Ownership of U.S. Treasury Securities (Abridged)

In 2004, for the first time, foreigners owned more than half of privately held U.S. public debt, mostly in the form of marketable U.S. Treasury securities. In internal discussions at the U.S. Treasury Department, the increase in foreign appetite for Treasury securities represented global investors' vote of confidence in the U.S. economy. Many in the Treasury believed that broad foreign ownership helped lower Treasury borrowing costs. But there was an increasing uneasiness among many in Washingtons power circle about U.S. dependence on foreign loans. This case describes the meeting between the Treasury and the Treasury Borrowing Advisory Committee (TBAC) of the Bond Market Association on August 3, 2004, in which the Treasury gave the Committee the charge to discuss, among other issues, the level of foreign ownership. Written for a first-year course entitled Global Economies and Markets, this case describes the market for U.S. Treasury securities, giving details on market institutions and market participants, and some of the reasons U.S. Treasury securities serve as benchmarks and hedging instruments. As the third case in the module on global markets, it is used to describe a market that is closest to the ideal of a perfectly competitive market and to illustrate the relationship between market institutions and structure on the one hand, and market liquidity and efficiency on the other.

Determinants of ownership-based entry mode choice of MNEs: Evidence from Mongolia

Abstract and Key Results ▪ This paper provides a comprehensive analysis of foreign investors’ ownership strategies in the land-locked transition economy of Mongolia. Drawing broadly on the transaction cost theory and institutional model, a number of investing firm and host country characteristics were identified. Drawing on a sample of 1,033 affiliates of foreign investors with varying levels of foreign ownership, the paper examines the choice between a wholly owned subsidiary (WOS) and a joint venture (JV). ▪ Strong support has been found for the impact of nationality and normative distance on the ownership mode choice of foreign investors. The results show that the main determinants of foreign equity ownership found in previous research also influence the ownership structure offoreign affiliates in Mongolia. The extent of FDI concentration, natural resource intensity of target industry and location of the affiliate have the expected impact on the foreign investor’s choice between a JV and a WOS. However, no support has been found for the impact of capital size of affiliate on the level of equity ownership of foreign affiliates.

Foreign ownership and investment: evidence from Korea

This study examines whether an increase in foreign ownership affects investment in Korea. Many studies have shown that in an imperfect financial market, a firm's investment depends on the availability of internal funds. If high foreigners’ shareholding is a sign of a firm's good financial position, and if foreign investors demand better corporate governance to protect their investments, then cash-flow sensitivity of investment decreases with the level of foreign ownership. Using data from Korean firms, it is found that cash-flow sensitivity of investment is lower in firms with high foreign ownership than in those with low foreign ownership. This finding is regarded as evidence for a potential benefit of open financial markets.

Foreign Ownership of U.S. Treasury Securities

In 2004, for the first time, foreigners owned more than half of privately held U.S. public debt, mostly in the form of marketable U.S. Treasury securities. In internal discussions at the U.S. Treasury Department, the increase in foreign appetite for Treasury securities represented the global investors' vote of confidence in the U.S. economy. Many in the Treasury believed that broad foreign ownership helped lower Treasury borrowing costs. But there was an increasing uneasiness among many in Washington's power circle about U.S. dependence on foreign loans. This case describes the meeting between the Treasury and the Treasury Borrowing Advisory Committee (TBAC) of the Bond Market Association on August 3, 2004, in which the Treasury gave the Committee the charge to discuss, among other issues, the level of foreign ownership. Written for a first-year course called Global Economies and Markets, this case describes the market for U.S. Treasury securities, giving details on market institutions and market participants and some of the reasons U.S. Treasury securities serve as benchmarks and hedging instruments. As the third case in a module on global markets, it describes a market that is closest to the ideal of a perfectly competitive market and illustrates the relationship between market institutions and structure, on the one hand, and market liquidity and efficiency, on the other.

Ownership, Governance, and Bank Performance: Korean Experience

The paper examines the effect of ownership and governance on firm performance. Tracing the post financial crisis experience, 1998–2002, of the Korean commercial bank industry, the paper investigates whether the involvement of foreign investors in the ownership structure had any significant effect on the banks’ performance i.e., return and risk measures. Further, it examines the effects of the presence of outside directors, especially directors from foreign countries, in the corporate board structure impacts banks performance. Evidence indicates that the extent of the foreign ownership level, not the mere existence of foreign ownership, has a significant positive association with the bank return and a significant negative association with the bank risk. The number of outside board of directors does not have any significant affect on performance however the presence of a foreign director on that board is significantly associated with bank return and risk. These findings are relatively robust under the different specifications of performance measures.

Influences on foreign ownership level and entry mode choice in Vietnam

This study examines the determinants of (1) ownership level in equity joint ventures and (2) foreign market entry mode choice in the context of Vietnam. The first part is a replication of [Pan, Y. (1996). Influences on foreign equity ownership level in joint ventures in China. Journal of International Business Studies, 27, 1–26] study of foreign ownership level in equity joint ventures in China. Though Vietnam and China share some common characteristics, most of Pan's findings are not generalizable to Vietnam. The second part indicates that advertising intensity, country risk of Vietnam, project investment amount, project duration, cultural distance, competitive intensity, and location of investment have significant impacts on entry mode choice. An integrated analysis of joint venture ownership level and entry mode choice based on percentage of foreign equity suggests that only some of the above factors have statistically significant effects.

Foreign ownership and corporate income taxation: An empirical evaluation

Foreign ownership allows countries to effectively export part of their corporate tax burden. Hence, countries with high foreign ownership are expected to impose relatively high corporate taxes. The findings of this paper suggest that there indeed is an economically significant positive relationship between foreign ownership and tax burdens in Europe. Already significant foreign ownership levels in Europe offer an explanation for the absence of a ‘race to the bottom’ in corporate tax levels.