Wholly-owned Subsidiary Research Articles

Accounting Treatment of the Takeover of the Corporate Bond of the Defunct PTC, Wholly Owned Subsidiary -case Study of Press Corporation Plc

Accounting Treatment of the Takeover of the Corporate Bond of the Defunct PTC, Wholly Owned Subsidiary -case Study of Press Corporation Plc

The Disregard of Personality of Wholly-Owned Subsidiaries under the Circumstance of Excessive Dominance and Control—Taking the Case of a Electric Wire Company Suing a Shareholder of an Electric Installation Company for Liability for Infringement of Creditor’s Interests as an Example

The Disregard of Personality of Wholly-Owned Subsidiaries under the Circumstance of Excessive Dominance and Control—Taking the Case of a Electric Wire Company Suing a Shareholder of an Electric Installation Company for Liability for Infringement of Creditor’s Interests as an Example

WOMAN DIRECTORS ON THE BOARD OF INDIAN COMPANIES: A MYTH OR REALITY

Recently, the companies, JM Financial Properties and Holdings, Shankar Packagings, Krishna Solvechem, a wholly-owned subsidiary of the Maharashtra State Road Development Corporation were fined for not appointing woman director on their boards. The appointment of a woman director on board was introduced in India in 2013 by enacting the legislation, of the Companies Act, 2013. And, the Listing regulations also made it mandatory for listed companies to have one woman director and the rule was to be complied by April 2015. But, from the incident of imposition of the fine, it can be inferred that there is no complete compliance yet even after 8 years. Therefore, an attempt is made to find out how far the rules relating to women directors have been complied within India.

Al-Fe Based Molten Salts for Long Duration Energy Storage

There is a need for high energy density long duration energy storage that utilizes earth abundant elements, such as Al and Fe. Energy storage devices that utilize molten salt electrolytes can take advantage of these earth abundant materials and promise to deliver high energy densities. Continued development and in-depth investigation of these fully inorganic, molten salt electrolytes is necessary for the continued progress of low-cost battery technologies. We have been exploring the properties of a new molten salt system which utilizes Al and Fe components and can feasibly be operated as an electrochemically active medium for long duration energy storage. Ternary molten salt compositions of AlCl3-FeCl3-NaCl and AlCl3-FeCl2-NaCl were evaluated for their phase behavior and electrochemical performance at intermediate temperatures (~160 - 210 °C). We found that certain compositions of AlCl3-FeCl3-NaCl were fully or nearly fully molten at 160 °C and that more AlCl3 was needed in the melt to facilitate the FeCl2 dissolution. The electrochemistry of these salts was probed and found that the Fe species will cycle between the Fe3+/Fe2+ oxidation states (as FeCl3/FeCl2) but that at lower temperatures, the FeCl2 will precipitate out of the melt and block the electrode. By increasing the test temperatures, the produced FeCl2 dissolves into the melt allowing the un-blocked electrode to sustain large reduction currents. Future work will investigate ways to increase FeCl2 concentration in the melt and to facilitate its oxidation in order to optimize the molten salt catholyte electrochemical behavior and demonstrate it in a working battery.This work was supported by the U.S. Department of Energy’s Office of Electricity through the Energy Storage Research Program, managed by Dr. Imre Gyuk. Sandia National Laboratories is a multi-mission laboratory managed and operated by National Technology and Engineering Solutions of Sandia, LLC, a wholly-owned subsidiary of Honeywell International, Inc., for the U.S. Department of Energy’s National Nuclear Security Administration under contract DE-NA0003525. This paper describes objective technical results and analysis. Any subjective views or opinions that might be expressed in the paper do not necessarily represent the views of the U.S. Department of Energy or the United States Government.SAND2022-16623 A

Analysis of Dairy M&A: Evidence from Acquisition of Ausnutria by Yili Diary

Nowadays, dairy industry has shown a diversified development trend, all kinds of dairy enterprises not only produce room temperature milk, yogurt, infant formula, goat milk powder track also gradually become the goal of dairy enterprises development. A number of dairy companies have previously implemented acquisitions aimed at developing the goat milk powder, such as Mead Johnson's acquisition of Mercurial. Yili Corporation ("Yili"), as a leading company in China's dairy industry, aims to complete its industrial structure and expand the development of goat milk powder. From 2020 to 2022, Yili, through its wholly-owned subsidiary, Hong Kong Jingang Trade Holding Co ("Jingang"). After the acquisition, Yili became the sole major shareholder. With this acquisition, both parties aim to reap synergies and seek the operational benefits of 1+1>2. The purpose of this paper is to examine the financial impact of this merger on both companies and to make recommendations for future mergers and acquisitions of related dairy companies. According to the analysis, this paper figure out that M&A plays a strategic role for both companies, facilitating the integration and utilization of resources of both companies, bringing a win-win situation for both parties. However, the long-term impact of the M&A will require ongoing attention. These results shed light on guiding further exploration of the M&A of dairy products enterprise.

Factor Analysis Investigating the Efficacy of HP-3070 Transdermal System in Positive and Negative Syndrome Scale Five Adults With Schizophrenia

AbstractIntroductionHP-3070, a once-daily asenapine transdermal system, is FDA-approved for adults with schizophrenia. In a pivotal phase 3 randomized controlled study, patients with schizophrenia who were treated once daily with HP-3070 demonstrated significant improvement in Positive and Negative Syndrome Scale (PANSS) total scores compared with placebo. The PANSS score’s five-factor structure can also assess treatment efficacy across different domains. This post-hoc analysis of the pivotal study evaluated the efficacy of HP-3070 by examining these domains.MethodsIn the pivotal phase 3 study, adults with acute exacerbations of schizophrenia were randomized to 6 weeks of treatment with HP-3070 3.8mg/24h, 7.6mg/24h, or placebo. Factor analysis of PANSS scores was performed using five domains (negative symptoms, positive symptoms, disorganized thought, uncontrolled hostility/excitement, anxiety/depression). Mixed-model repeated-measures (MMRM) analysis included change from baseline in PANSS factor score as the repeated dependent variable, with country, treatment, visit, treatment by visit interaction, and baseline PANSS score as covariates.ResultsThe analysis included 607 patients. Least-squares mean estimates (standard error) of the difference from placebo in change from baseline to Week 6 for each factor were as follows: negative symptoms, 3.8mg/24h, -0.9 (0.43), P=0.045, and 7.6mg/24h, -0.4 (0.43), P=0.41; positive symptoms, 3.8mg/24h, -2.3 (0.57), P<0.001, and 7.6mg/24h, -2.0 (0.57), P<0.001; disorganized thought, 3.8mg/24h, -1.5 (0.38), P<0.001, and 7.6mg/24h, -0.9 (0.38), P=0.03; uncontrolled hostility/excitement: 3.8mg/24h, -1.1 (0.30), P<0.001, and 7.6mg/24h -0.9 (0.30), P=0.002; anxiety/depression, 3.8mg/24h, -0.5 (0.31), P=0.14, and 7.6mg/24h, -0.6 (0.31), P=0.07.ConclusionsHP-3070 demonstrated treatment effects on a PANSS five-factor model, with the results indicating impact on negative symptoms, positive symptoms, disorganized thought, uncontrolled hostility/excitement, and anxiety/depression. These findings suggest that HP-3070 may address a broad range of symptoms in schizophrenia.FundingNoven Pharmaceuticals, Inc., a wholly-owned subsidiary of Hisamitsu Pharmaceutical, Co.

Imbalanced trade dependence and Chinese firms’ entry mode choices: the moderating effects of state ownership and marketization

PurposeApplying resource dependence theory (RDT), this research paper aims to examine the effect of imbalanced trade dependence (ITD) on entry mode choices and how state ownership and marketization each can moderate this effect.Design/methodology/approachUsing data on 1,404 foreign projects made by 493 Chinese listed firms during the 2009–2015 period of time, this study applies logit regression to do the statistical analysis.FindingsIt finds that ITD positively affects the choice of wholly-owned subsidiaries. State ownership and marketization each can moderate this influence.Originality/valueIt develops the concept of ITD, applies it to examine entry mode choices and lets us better understand the substitutive or complementary relationship between governments and foreign firms as two sources of resources. It helps us better understand some competitive advantages of emerging market firms (EMFs) and the impacts of the state on EMFs’ outward FDI. It contributes to entry mode research by applying RDT to explain how ITD influences entry mode choices and how state ownership and marketization each can moderate this relationship.

A Review of Business Development Strategies in Emerging Markets: Economic Impacts and Growth Evaluation

Emerging markets, characterized by their rapidly growing economies, youthful populations, and transitional policies leaning towards open economies, represent both a significant opportunity and challenge for businesses. This review delves into the nuances of business development strategies in these markets, while also exploring the consequential economic ramifications. Historically, business development strategies in emerging markets were anchored on direct investments and exports. However, with the pace of globalization and the rise of digital technologies, there has been a marked shift in strategies. The review reveals that these strategies now prioritize understanding the local culture, forming beneficial partnerships with local enterprises, adapting to the technological landscape, and innovating products and services in line with local needs and preferences. Entry modes into these markets are no longer one-size-fits-all. Companies are seen to be leveraging a mix of wholly-owned subsidiaries, franchises, joint ventures, and even digital-first entries to navigate the complex terrains of emerging markets. Local partnerships, especially, have emerged as a vital tool for foreign businesses. Partnering with local entities not only aids in navigating the regulatory and cultural landscape but also in accessing established distribution networks and building trust amongst local consumers. The adaptation of products and services to resonate with local consumers, driven by meticulous market research, has played a pivotal role in the success of many global brands in emerging markets. Furthermore, the technological boom, especially in sectors like e-commerce, fintech, and telecommunication, has opened new avenues for businesses. More direct economic implications include influences on the Gross Domestic Product (GDP) and foreign direct investments. Emerging markets with welcoming business policies have seen substantial inflows of capital, bolstering their economic growth trajectories. A total of 55 research papers were reviewed for this study and the methodology used for the study is the systematic review method using thematic analysis, where recurring themes, insights, and patterns were identified and categorized. However, it is not without challenges. Cultural nuances, regulatory bottlenecks, geopolitical uncertainties, and financial unpredictabilities (like currency fluctuations) can pose significant barriers. Also, while entering an emerging market might be easier now than before, sustaining business operations and managing competition, both from established global players and rising local enterprises, is a continual challenge. In conclusion, the study positing that businesses need to adopt a flexible, localized, and technology-driven approach, while policymakers in emerging economies should focus on creating a more conducive environment for foreign businesses. As we move forward, further research is essential to keep abreast of the evolving trends and challenges in this dynamic nexus of business development and economic growth in emerging markets.

Outward foreign direct investment and domestic innovation efforts: Evidence from India

This paper examines the role of outward foreign direct investment (OFDI) by Indian firms on domestic firms' R&D using unique firm-level data for 2008–2018. While correcting for endogeneity arising from the sample selection, we apply panel data models to evaluate the OFDI and domestic R&D nexus. Our empirical analysis highlights the presence of positive impact of OFDI on the firm's decision to undertake R&D activities. Further, we find that irrespective of the mode of OFDI, i.e., both wholly-owned subsidiaries and joint ventures encourages firms to participate in R&D activities. However, only OFDI in the form of wholly-owned subsidiaries increases the R&D intensity of the parent firms' R&D activities.

Global cities and multilatinas: the search for global cities-specific advantages, establishment and ownership entry modes

PurposeThis paper aims to study the internationalization path of emerging market multinational enterprises (EMNEs) in their international expansion through the global cities (GCs) phenomenon.Design/methodology/approachThe authors used a quantitative approach to identify the most used ownership and entry modes, the preferred economic sectors and the level of interconnectedness of GCs.FindingsThe manuscript identified the predominance of the tertiary sector in the selection of GCs as foreign direct investment destinations. Second, the acquisition is the preferred entry mode regardless of the connectivity of the GC and the country of origin of the EMNE. The third is the use of wholly-owned subsidiaries as the preferred ownership mode. Finally, market-seeking is the main driver for the internationalization of Latin American EMNE. Consequentially, some GCs-specific advantages remain untapped by Latin American EMNE.Research limitations/implicationsThis manuscript considered each investment into a global city as a single step, although some acquisitions occurred incrementally through several small investments.Practical implicationsThe authors developed a road map for the internationalization of Latin American EMNEs through GCs, acquisitions and wholly-owned subsidiaries. Finally, service-oriented EMNEs, such as IT and financial services, target locations with high interconnectedness to maximize the benefits of GCs-specific advantages.Originality/valueThe authors pointed out that market-seeking, not resource-seeking or efficiency-seeking is the primary driver of the internationalization of EMNE into global cities.

Strategic asset-seeking foreign direct investments by emerging market firms: the role of institutional distance

PurposeThis study examines the impact of formal and informal institutional distances on the foreign ownership strategies of emerging market firms (EMFs).Design/methodology/approachThis is an empirical study relying on two sets of data collected over two time periods, 2006–2008 and 2017–2019, for publicly-listed Chinese companies.FindingsGreater formal institutional distances in the host and home countries make EMFs less likely to use joint ventures (JVs), while greater informal distances make EMFs more likely to use the JVs. When both formal and informal institutional distances are high, the use of JVs is more likely. These results are affected by the goal of the foreign direct investment (FDI) project, with strategic asset-seeking (SAS) FDI projects favoring the use of wholly owned subsidiaries (WOSs).Research limitations/implicationsThis study relies on cross-sectional data from publicly-listed Chinese companies, which may limit the generalizability of the findings.Practical implicationsEMFs investing in advanced countries should carefully assess the tradeoffs between transactional cost efficiency and legitimacy in making their foreign ownership decisions. If the goal is to access strategic assets, EMFs should consider WOSs to ensure the transfer of strategic assets and create value for the parent company.Originality/valueThe findings show that formal and informal distances between institutions have different impacts on foreign ownership strategies, providing empirical evidence for the need to balance conflicting cost-efficiency and legitimacy considerations when businesses make such strategic decisions. The authors show how this balance depends on the goal of the FDI project.

The impact of continuous and discontinuous host country risk on the location choice of Chinese enterprises' OFDI

Research on outwards foreign direct Investment (OFDI) has presented consistent evidence that Country risk has a significant impact on the choice of location for OFDI by firms. Using the overseas wholly-owned subsidiaries of Chinese listed enterprises between 2002 and 2020 as a sample, this study investigates the impact of different types of risk on the location choice of Chinese enterprises' OFDI, and the moderating effect of the state-owned status of enterprises on this impact. The empirical results show that both continuous and discontinuous risks in the host country have a suppression effect on Chinese enterprises' OFDI. This study also explores the moderating effect of internationalization experience and statehood on the suppression effect.

Governance of international franchise networks: Combining value creation and value appropriation perspectives

This study develops a new perspective on the franchisor’s choice of international governance modes as a value creation and value appropriation mechanism. Value creation refers to knowledge creation from the joint use of the franchisor’s intangible system-specific knowhow and foreign partners’ intangible local market knowhow; value appropriation refers to efficient knowledge exploitation based on transaction cost savings under conditions of uncertainty and transaction-specific investments. Based on primary data from 162 international franchise systems headquartered in eight countries, the results highlight the importance of intangible knowledge-based resources (franchisor’s system-specific knowhow and franchise partners’ local market knowhow) and transaction cost factors (transaction-specific investments, environmental uncertainty, and cultural uncertainty) for the franchisor’s choice between equity modes, such as wholly-owned subsidiaries, and joint venture franchising, and non-equity modes, such as single-unit franchising, area development franchising, and master franchising.

Foreign buyout of international equity joint ventures in China: When does performance improve?

Since the early 2000s, Sino-foreign equity joint ventures (JVs) have declined sharply as a predominant strategy for multinational enterprises (MNEs) to enter and operate in China. We study one of the contributory factors, foreign buyout, and its performance implications. By applying incomplete contract theory and an agency perspective, we provide micro evidence that superior post buyout performance is observed in converted wholly-owned subsidiaries (WOSs) with efficiency-seeking operations and subsequent CEO succession. The findings extend our understanding that ownership per se does not guarantee performance improvement. Instead, it is the alignment between ownership and the owner's inputs, and between ownership and the owner's managerial control, that give rise to performance improvement.

Familiarity Does Not Breed Contempt: Curbing Subsidiary Corruption Through a Legitimacy-Enhanced Ownership Structure

We analyze how the choice of firm ownership structure mitigates the effect of high dependence on a corrupt host government when investing abroad. We draw on a unique dataset of subsidiary-level engagement in corruption of 175 foreign subsidiaries entering three Central American countries. We found that there are two mechanisms to mitigate corrupt behavior when a subsidiary is dependent on a corrupt host government: internal legitimacy that accrues to wholly-owned subsidiaries, and external legitimacy built through a strong regional presence. The effect of dependency on a corrupt host government can be mitigated by enacting internal and external legitimacies.

R&D activities and innovation performance of MNE subsidiaries: The moderating effects of government support and entry mode

In the past few decades, the extant literature has examined the impact of R&D internationalization on innovation performance at the individual team member, team or project, subsidiary, and organizational levels. Despite this progress, however, research on conditional and contextual variables that may underpin the relationships between R&D internationalization and firm innovation performance at the subsidiary level remains scarce, and this area deserves further investigation. Using a large, unique dataset containing 524 foreign firms (216 wholly-owned subsidiaries (WOSs) and 308 international joint ventures (IJVs) with R&D subsidiaries in China), we show that: (a) local government support positively moderates the effect of foreign firms’ local R&D investment on their local subsidiaries’ innovation performance in China; (b) this relationship is stronger for IJVs than for WOSs; and (c) local government support appears to have a stronger moderating effect for IJVs than for WOSs on this relationship. Our study contributes to the growing literature on foreign firms’ internationalization of R&D, emerging market innovations and organizational entry modes.

The accelerating effect of institutional environment unfamiliarity on subsidiary portfolio expansion in a new host country

In forming external networks in a host country, a foreign subsidiary acquires knowledge which contributes to the parent’s stock of country-specific knowledge and capabilities. Building on this notion, we argue that an MNE unfamiliar with the institutional environment of a newly entered foreign country has an incentive to expand its subsidiary portfolio in that country at a higher rate. We test this using a longitudinal dataset of German public firms which made investments into 2220 new host countries between 1985 and 2015. We find that unfamiliarity accelerates subsidiary portfolio expansion most when the initial investment is a wholly-owned subsidiary, and that the effect becomes weaker over time. Our study contributes to the internationalization process literature by showing that being unfamiliar with a host country is not necessarily an obstacle to subsidiary portfolio expansion – indeed it can accelerate it.

The international business incubator as an entry mode – a systematic literaturę review

Background: Entry mode choice is a topic that has interested academic researchers for decades. Entry modes have been frequently conceptualized along a continuum from the export, through various forms of contractual and equity-based cooperation with partners in foreign markets, to wholly-owned subsidiaries. However, the barriers and challenges related to entering foreign markets remain significant for newcomers. A new phenomenon, namely the “international business incubator” (IBI), which is aimed at facilitating an enterprise’s entry into a foreign market, has recently emerged and been described in the literature as a new entry mode.
 Research purpose: The purpose of this paper is to investigate the existing knowledge in the lit-erature relating to the IBI as a method of foreign market entry.
 Methods: A systematic literature review using a keyword search in various academic databases was employed with the aim of answering the research questions proposed.
 Conclusions: The findings indicate that although the IBI phenomenon has become more wide­spread, the literature on this topic is very limited at present. The findings also reveal that improved risk/control trade-off, lower market entry costs, enhanced knowledge, network relationship, trust, institutional aspects, and strategic resource commitment are the main characteristics that give IBI advantages over other entry modes. Based on the findings of the existing body of knowledge, the pa­per provides recommendations for future research, which can contribute to the literature on the IBI.

Overseas Direct Investment from India: Setting Up of Step-Down Subsidiaries

The Indian legal framework regulating overseas direct investment from India is evolving to adapt to the challenges put forth by the increase in outward investment. In this context, the Foreign Exchange Management (Transfer or Issue of Any Foreign Security) Regulations, 2004 govern the setting up of step-down subsidiaries by an overseas Joint Venture (JV) or Wholly Owned Subsidiary (WOS) of Indian residents. The Regulations, while prohibiting the setting up of step-down subsidiaries by an overseas JV/WOS of an individual, allow the same in the case of overseas JV/WOS of other entities. This article argues that the reasons for this differential treatment include the historically restrictive approach of the Reserve Bank of India towards individuals and its concerns against the roundtripping of funds. The article lays down the context in which the Regulations operate by looking at the reasons that influence outward direct investment in India. It then analyses the regulatory approach governing the setting up of overseas step-down subsidiaries vis-à-vis individuals and other entities, highlighting the underlying concerns of curbing the menace of round-tripping of funds. The article concludes with critiquing the differential treatment between individuals and entities, and the restrictive approach taken in curbing the problem of round-tripping of funds. Indian overseas direct investment, step-down subsidiary, outward Indian investment, multi-layered corporate structure, round-tripping, Reserve Bank of India, Foreign Exchange Management Act.

SME Internationalization in Emerging Markets: Formal Institutions and Foreign Market Entry Strategy

Extant research pertaining to the relationship between formal institutions and the governance of equity-based subsidiary investments (wholly-owned subsidiary, or joint venture (JV) partnership) established by small-to-medium sized enterprises (SMEs) in foreign markets has generated equivocal results. To reconcile these disparate findings, we propose a more fine-grained conceptualization of the formal institutions construct. To do so, we employ an uncertainty-grounded lens to categorize formal institutions in terms of the distinct varieties of uncertainty (environmental versus behavioral) and transaction costs (information costs versus monitoring and enforcement costs) that they foster. More specifically, we theorize that formal institutions can be unbundled into environmentally-oriented formal institutions (EOFI) and behaviorally-oriented formal institutions (BOFI). We detail the distinct transaction cost-reduction mechanisms through which these two different types of formal institutions impact upon the equity-based governance choices of foreign-investing entrepreneurial firms in emerging markets. In brief, we propose that weaker BOFI foster both greater behavioral uncertainty and heightened monitoring and enforcement costs for these firms which will precipitate a preference for full ownership. Conversely, weaker EOFI induce greater environmental uncertainty and more pronounced information costs which will motivate these investors to engage in a JV with a local partner. The results of our tests of these hypotheses provide empirical support for the main effects of EOFI and BOFI, but only partial support for our hypothesis pertaining to the interaction effect between these two categories of formal institutions.