Shareholder Value Creating Strategies for Emerging Markets

Abstract

Purpose

This study empirically identifies three strategies for creating shareholder value for firms who venture into Emerging markets (EMs) in search of corporate growth and profitability.

Methodology

To uncover these value creating strategies, we apply Cluster analysis techniques, analysis of variance as well as survey several qualitative case-studies of firms who have entered EMs worldwide.

Findings

Our findings demonstrate how firms can – and do – tap into the potential that EMs offer, despite the inherent riskiness of these markets and/or constraints on corporate resources. Statistically, no single shareholder value creating strategy is more (or less) remunerative than other strategies. Many equally profitable trajectories coexist vis-à-vis corporate growth in EMs.

Research limitations/implications

Our findings are based on stock-markets’ expectations of firm performance; these expectations may not correspond to the actual future firm performance.

Practical implications

The principles we have isolated have a broad appeal because they identify variety of paths that facilitate shareholder value creation via participation in EMs. We expose the inner workings of these trajectories and illustrate particular firm-specific and location-specific combinations associated with profitable EM ventures.

Originality/value

This study seriously challenges the conventional view that value creation is a function of singular positive influences. On the contrary, this study establishes that value creation is multi-dimensional and submits that a more refined way to augment performance is to develop an ability to combine relevant firm-specific and location-specific factors so that they can, if needed, offset the impositions of each other.

Citation

Merchant, H. (2014), "Shareholder Value Creating Strategies for Emerging Markets", Emerging Market Firms in the Global Economy (International Finance Review, Vol. 15), Emerald Group Publishing Limited, Leeds, pp. 147-179. https://doi.org/10.1108/S1569-376720140000015007