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Effects of ownership structure on the relationship between multinationality and downside risk: Evidence from China

Chao Zhou (School of Economics and Commerce, South China University of Technology, Guangzhou, China)

Cross Cultural & Strategic Management

ISSN: 2059-5794

Article publication date: 2 September 2019

Issue publication date: 8 October 2019




The purpose of this paper is to explore how multinationality affects multinational companies’ (MNCs) downside risk and the moderate effects of ownership structure in the setting of emerging markets based on Chinese publicly traded manufacturing MNCs.


The author derives hypotheses based on real options theory and agency theory, and tests hypotheses by using Tobit model and a unique data set of Chinese A-shared publicly traded manufacturing MNCs in the period of 2010–2016.


The empirical results suggest that multinationality is positively related to downside risk and this effect is subjected to ownership structure for firms in emerging markets. In particular, multinationality of MNCs with a high level of ownership concentration, managerial ownership and institutional ownership is more likely to reduce downside risk.

Practical implications

The main conclusion of this paper highlights the importance of ownership structure of MNCs in explaining the real options value of multinationality, and conveys to owners of MNCs in China and other emerging markets the need to strengthen firms’ governance if they want to maximize the benefits of multinational operations.


This study extends existing studies by taking ownership structure into consideration and highlighting the importance of agency problem in the examination of multinationality and downside risk, which provides a potential explanation for previous mixed evidence. This study also provides new evidence for the relationship between multinationality and downside risk by using a unique sample from China, an emerging market country.



This work is supported by “the Fundamental Research Funds for the Central Universities” (Grant No. 2018BSXM16). The author thanks Dongwei Su, Kebin Deng, Ronaldo Parente (the editor) and two anonymous reviewers.


Zhou, C. (2019), "Effects of ownership structure on the relationship between multinationality and downside risk: Evidence from China", Cross Cultural & Strategic Management, Vol. 26 No. 3, pp. 401-421.



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