Role Of Foreign Ownership Research Articles

Foreign entry and the Turkish banking system in 2000s

In recent decades, the role of foreign ownership in banking sectors, and especially the developing ones has become a frequently investigated topic among finance scholars. Similar to many other developing countries seeking to attract foreign direct investments, Turkey has experienced a great increase in the number of foreign-owned banks in the sector following the 2000 and 2001 economic and financial crises. Using panel data regression analysis for a sample of 31 deposit banks operating in Turkey, for the period 2002–2012, we find that foreign ownership has a negative and statistically significant impact on accounting profits, proxied by the ratio of earnings before taxes to total assets. However, contrary to expectations, three other dependent variables representing interest rate spreads, non-lending activities and short term risk, were not found to be significantly associated with foreign ownership.

Co-location and Spatial Wage Spillovers in China: The Role of Foreign Ownership and Trade

Summary This paper examines how wages in China are influenced by the interaction and co-location of firms across geographical space. Specifically, and with an emphasis on globally engaged firms and China’s uneven growth across regions we use a spatial econometric approach to estimate the direct and indirect impact of foreign-ownership and export participation on wages. Spatial Durbin Model results reveal an indirect effect of foreign-ownership and exporting on the compensation of workers in co-located firms as well as evidence in support of the standard direct effect that foreign firms, exporters, and firms with a highly educated workforce pay higher wages.

World Market Access of Emerging-Market Firms: The Role of Foreign Ownership and Access to External Finance

This paper uses micro-data from the World Bank Investment Climate Surveys 2002-2006 to investigate how foreign ownership and access to external finance affect the likelihood of manufacturers in emerging markets to export and/or import. Applying propensity score matching to control for differences across firms in terms of labor productivity, size, etc., we find that foreign ownership and access to external finance are statistically significant determinants of the likelihood that a firm will export or import. Foreign ownership has a large positive impact on the likelihood to engage in direct trade but a negative effect on the likelihood to trade through intermediaries; the effects vary across upper and lower middle income countries. Access to external finance has a modest but positive effect on the likelihood to engage in any of the modes of connecting with foreign customers or suppliers.

Surviving the Global Financial Crisis: Foreign Ownership and Establishment Performance

We examine the differential response of establishments to the recent global financial crisis with particular emphasis on the role of foreign ownership. Using a worldwide establishment panel dataset, we investigate how multinational subsidiaries around the world responded to the crisis relative to local establishments. We find that, first, multinational subsidiaries fared on average better than local counterfactuals with similar economic characteristics. Second, among multinational subsidiaries, establishments sharing stronger vertical production and financial linkages with parents exhibited greater resilience. Finally, in contrast to the crisis period, the effect of foreign ownership and linkages on establishment performance was insignificant in noncrisis years. (JEL F23, G01, L22, M16)

Firms in the Great Global Recession: The Role of Foreign Ownership and Financial Dependence

This paper investigates the channels through which the global crisis of 2008-2009 spread to economic activity of an emerging, fast growing economy with sound macroeconomic fundamentals. On the basis of Polish firm-level data we find that a number of individual firm characteristics account for a heterogeneous response. In particular, foreign ownership appears to have provided a higher degree of resilience to the crisis. Our results indicate that this effect might be due to intra-group lending mechanisms supporting affiliates facing external credit constraints.

Firms in the great global recession: The role of foreign ownership and financial dependence

This paper investigates the channels through which the global crisis of 2008–2009 spread to economic activity of an emerging, fast growing economy with sound macroeconomic fundamentals. On the basis of Polish firm-level data we find that a number of individual firm characteristics account for a heterogeneous response. In particular, foreign ownership appears to have provided a higher degree of resilience to the crisis. Our results indicate that this effect might be due to intra-group lending mechanisms supporting affiliates facing external credit constraints.

Do foreign investors exhibit a corporate governance disadvantage? An information asymmetry perspective

Although foreign equity ownership around the world has increased substantially over the last three decades, there is little evidence on the role of foreign ownership in the host country. Using a large sample of foreign partial acquisitions in the US from 1981 to 1999, we examine the determinants of foreign acquirers’ governance activities in US targets. We focus on the information asymmetries that foreign acquirers face in the US as a key determinant of their governance activities in US targets, and hypothesize that such information asymmetries provide them with weak incentives to engage in governance activities. Consistent with our hypothesis, we find that foreign acquirers whose countries share a common language and a common culture with the US are more likely to engage in post-acquisition governance activities than are other foreign acquirers. Moreover, the probability of foreign acquirers’ governance activities is positively related to their previous acquisition activities in the US, but negatively related to the physical distance from the targets and the difference in shareholder rights scores between the US and their home countries. Our results suggest that information asymmetries that foreign acquirers face in the host country are an important determinant of their governance activities in domestic targets.

Productivity, Ownership & National Chains: Evidence from the British Retail Sector

This paper investigates whether foreign-owned retailers operating in the British retail sector perform differently than domestic-owned firms with diverse national presence. Using simultaneous quantile regression techniques we test for any sign of performance gaps. The findings suggest that foreign ownership turns out to be a weak explanatory factor of differences in performance across retailers. Only when firms in the upper quantiles of TFP are compared, the role of foreign ownership gains statistical significance, although with exceptions. On the other hand, firms able to expand their infrastructure across Great Britain possess a productivity advantage over more local retailers. This implies that the existence of a national network of stores may be more important than the origin of ownership.

The environmental performance of firms: The role of foreign ownership, training, and experience

In this paper we extend the debate on the environmental implications of foreign direct investment in developing countries by examining a new mechanism through which foreign influence can affect the environmental performance of firms. We focus on the extent to which key workers who have had previous training or experience in a foreign owned firm transfer and utilise their knowledge gained to the benefit of the local environment. To this end we use detailed firm-level data on manufacturing firms in Ghana. Our econometric results suggest that the foreign training of a firm's decision maker does reduce fuel use, particularly so in foreign owned firms. Foreign ownership per se does not influence fuel use or total energy use but is found to increase electricity use, perhaps the cleanest form of energy used by Ghanaian firms.

Restructuring and Efficiency in the Estonian Manufacturing Industry: The Role of Foreign Ownership

As a result of the recent privatisation process, a large amount of foreign direct investments have moved into the transition economies. This inflow has undoubtedly left its imprint on the restructuring process of these countries. The purpose of the present paper is empirical analysis of the role of foreign owners in the restructuring process of Estonian manufacturing enterprises and their contribution towards raising efficiency in this industry. The authors' main hypothesis is that foreign ownership is generally instrumental in increasing efficiency at company level. The second hypothesis is that enterprises representing different forms of ownership use different models for restructuring. The authors compared the efficiency indicators of domestic and foreign-owned enterprises in the manufacturing sector, applying the pyramid of efficiency worked out by the British Institute of Management and the Centre for Interfirm Comparison. Firm-level data of the Estonian Statistical Office for the period 1995-1999 were used. The analysis led us to the conclusion that foreign enterprises do contribute to increasing efficiency at company level. The paper indicates, additionally, that foreign enterprises are mostly engaged in strategic restructuring. The reasoning here is that during the observation period the labour productivity of foreign enterprises increased due to sales growth. Moreover, foreign enterprises are more capital-intensive, pay higher salaries, are more export-oriented, have more assets per employee and a higher investment capability. Domestic enterprises, on the contrary, are more likely to use re-active restructuring. The most essential signal of re-active restructuring is the fact that the growth of these enterprises' labour productivity is achieved owing to a reduced number of employees, decreasing costs, and low returns on capital. However, there are some important signs, showing that domestic enterprises have also become engaged in strategic restructuring, which indicates that foreign investors motivate domestic enterprises to follow their strategy. Thus, while the use of their earlier model - reactive restructuring - can mean delays in regaining the lost advantages, then involvement in strategic restructuring will help domestic enterprises to conform to the environmental changes facing countries in transition. The results of the present paper indicate the relevance of foreign direct investment in speeding up restructuring of the manufacturing industry of Estonia.