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Article
Publication date: 12 July 2021

Quynh Nga Nguyen Thi, Quoc Trung Tran and Hong Phat Doan

This paper investigates how the global financial crisis changes the effects of state ownership and foreign ownership on corporate cash holdings in an emerging market.

Abstract

Purpose

This paper investigates how the global financial crisis changes the effects of state ownership and foreign ownership on corporate cash holdings in an emerging market.

Design/methodology/approach

We employ an interactive term between state ownership (foreign ownership) and a crisis dummy to analyze how the global financial crisis determines the effect of state ownership (foreign ownership) on corporate cash holdings.

Findings

With a research sample including 5,493 observations from 621 listed firms over the period 2007–2017, we find that state ownership (foreign ownership) is negatively (positively) related to corporate cash holdings and the effect of state ownership (foreign ownership) is stronger (weaker) during the crisis period. Moreover, the increase in the effect of state ownership is larger in financially unconstrained firms.

Originality/value

Prior research shows that the effects of state ownership and foreign ownership on corporate cash holdings in emerging markets are still debatable. This paper extends this line of research by investigating how the global financial crisis – an exogenous shock – changes these effects.

Details

International Journal of Emerging Markets, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1746-8809

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Article
Publication date: 30 June 2021

Mohammed Bajaher, Murya Habbash and Adel Alborr

This paper aims to examine whether board governance mechanisms and ownership structure play a role in foreign investors’ decisions when buying shares in Saudi listed companies

Abstract

Purpose

This paper aims to examine whether board governance mechanisms and ownership structure play a role in foreign investors’ decisions when buying shares in Saudi listed companies

Design/methodology/approach

Foreign investment in the Saudi capital market started in 2015 and reached a peak in 2019, with corporate governance regulations having been updated in 2017. The authors tested the proposed relationships using hand collected data for all Saudi non-financial firms in 2019.

Findings

This study found that it does not play a role in attracting foreign investment in the Saudi capital market. Foreign investors also seem to avoid firms with concentrated ownership that either have high government or director ownership; however, accounting and market variables show significant impact on foreign investors' decisions. The outcomes of this study provide empirical evidence that current foreign investors in the Saudi stock market do not place enough merit on board governance and their investment decisions tend to depend on share performance. Thus, the results show that the current governance changes and capital market regulations in Saudi Arabia may not have been sufficient to stimulate the inflow of institutional foreign investment to the country to date, but rather they have attracted individual retail foreign investors.

Originality/value

This empirical study is one of only a small number of studies to investigate the impact of internal corporate governance on foreign ownership in developing countries and the first in the Saudi context. In fact, most previous governance research in Saudi Arabia focused on how board governance and ownership structure influences firm performance. A review of the prior studies found that only Badawi et al. (2019) examined the determinants of foreign ownership among Saudi listed firms. Thus, the present investigation extends that study by examining the role of board governance in attracting foreign investors.

Details

Journal of Financial Reporting and Accounting, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1985-2517

Keywords

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Article
Publication date: 16 June 2021

Trisninik Ratih Wulandari and Doddy Setiawan

This study aims to examine the effect of ownership concentration and foreign ownership on tunneling activities in Indonesia.

Abstract

Purpose

This study aims to examine the effect of ownership concentration and foreign ownership on tunneling activities in Indonesia.

Design/methodology/approach

The population in this study were manufacturing companies listed on the Indonesian Stock Exchange from 2014 to 2018. The total observations used in this study were 557 observations. This study used three measurements to assess tunneling activities in a company, namely, related party receivables (TUL1), related party payables (TUL2) and related party receivables-payables (TUL3).

Findings

The results of this study indicated that ownership concentration and foreign ownership had a negative effect on tunneling activity of TUL1. Meanwhile, the effect of ownership concentration and foreign ownership on TUL2 and TUL3 showed a positive effect. This indicated that manufacturing companies in Indonesia preferred to carry out tunneling activities through related party payables compared with related party receivables. Foreign ownership was also effective in controlling the company’s tunneling activities when the company conducted tunneling transactions of related party receivables. Small companies and companies with positive return on assets were more susceptible to tunneling activities carried out by the companies.

Practical implications

The results of this study can be used as a consideration for investors in making decisions by looking at tunneling activities carried out by companies in Indonesia.

Originality/value

To the best of the authors’ knowledge, no previous study in the tunneling literature has compared the results of the effect of the concentration of foreign ownership and ownership on tunneling using three measurements at once. This is useful to see the company’s behavior of tunneling activities from a different perspective.

Details

Rajagiri Management Journal, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0972-9968

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Book part
Publication date: 1 June 2005

Stephen P. Ferris and Kwangwoo Park

We find a significant curvilinear relation between Japanese firm value and the percentage of equity held by foreign investors. Firm value rises until foreign ownership

Abstract

We find a significant curvilinear relation between Japanese firm value and the percentage of equity held by foreign investors. Firm value rises until foreign ownership reaches approximately 40%, and then it begins to decline. It appears that large foreign institutional investors invest in well-performing firms and serve as effective monitors. Our results remain robust even after controlling for other corporate governance variables, such as equity ownership by main banks and board membership by foreign investors. It seems that most of the increase in firm value and the performance improvement are due to rising levels of equity ownership in non-keiretsu (independent) firms by foreign investors. We also show that an increase in foreign ownership is correlated with a rise in R&D expenditures, suggesting that foreign institutional investors contribute to the long-term viability and competitiveness of Japanese firms.

Details

Corporate Governance
Type: Book
ISBN: 978-0-7623-1187-3

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Article
Publication date: 19 March 2021

Dengjun Zhang and Yuquan Cang

This paper aims to investigate the impact of ownership concentration of the largest shareholder and foreign ownership on the demand for an external audit for small and…

Abstract

Purpose

This paper aims to investigate the impact of ownership concentration of the largest shareholder and foreign ownership on the demand for an external audit for small and medium-sized enterprises (SMEs) in six Latin American countries. In particular, the authors test whether foreign-owned firms (compared with domestic private-owned firms) and domestic firms with minority foreign shareholders are more likely engaged in audit assurance.

Design/methodology/approach

The authors applied the logit model to estimate the impact of ownership concentration and owner/shareholder type on audit demand, using a sample of 4,609 SMEs. The probabilities of being audited for firms in these countries are then calculated from the estimation results.

Findings

The empirical results suggest an inverse relationship between ownership concentration and audit demand only for Uruguay and Peru. However, foreign-owned firms and domestic private-owned firms with minority foreign ownership have a high probability of being audited for all sample countries.

Research limitations/implications

Policymakers in developing countries may promote foreign investments in domestic private-owned firms to improve their corporate transparency and governance.

Originality/value

This study contributes to the growing literature on the impact of ownership on audit demand by particularly focusing on foreign owners and foreign minority shareholders. The findings indicate that foreign ownership (either majority or minority) contributes to corporate transparency and business environments in emerging countries.

Details

Pacific Accounting Review, vol. 33 no. 3
Type: Research Article
ISSN: 0114-0582

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Article
Publication date: 14 September 2015

Godfred A. Bokpin, Zangina Isshaq and Eunice Stella Nyarko

The study aims to seeks to ascertain the impact of corporate disclosure on foreign equity ownership. Corporate disclosures are important to for stock markets because it is…

Abstract

Purpose

The study aims to seeks to ascertain the impact of corporate disclosure on foreign equity ownership. Corporate disclosures are important to for stock markets because it is an activity that mitigates information differences between company insiders and outsiders.

Design/methodology/approach

Corporate disclosures assume an even greater important when company outsiders are not domiciled in the same country as the company and the company insiders. In this study, the relation between foreign share ownership and corporate disclosures using data on Ghana, Kenya and Nigeria is examined.

Findings

The consistent results in this study are that foreign share ownership is positively related to firm size. A negative relation, however, between foreign share ownership and corporate disclosure is found, but this turns out to be related to disclosures about ownership, while disclosures on financial reporting and board management have a positive and insignificant statistical relation taking into account unobserved country, time and firm effects. Further analysis shows that corporate disclosures are very persistent and negatively related to lag foreign share ownership. No consistent statistical relation is found between disclosure and market-to-book values as a proxy for investment opportunities. It is recommended to African-listed firms to pursue adoption of high-quality financial reporting standards and to increase their reporting on board management. The study also recommends that the African Government weighs the benefits of detailed ownership disclosures.

Originality/value

The study utilises frontier market data to complement existing literature on how corporate disclosure and transparency influences foreign investors decision to invest in Africa.

Details

International Journal of Law and Management, vol. 57 no. 5
Type: Research Article
ISSN: 1754-243X

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Article
Publication date: 5 June 2019

Vicky Ching Gu, Ray Qing Cao and John Wang

Although foreign ownership has been widely studied to show its impact on firm performance, the findings are mixed and the underlying rational to explain the impact is not…

Abstract

Purpose

Although foreign ownership has been widely studied to show its impact on firm performance, the findings are mixed and the underlying rational to explain the impact is not entirely clear. The purpose of this study is to determine if there is a direct relationship between foreign ownership and performance or if this relationship is indirect and affected by mediating and moderating variables such as international diversification and competitive environment.

Design/methodology/approach

Financial data, survey data and other financial measures for known indices are used in the research, and SPSS and SEM (Stata 15) analyses are used to test empirically derived hypotheses.

Findings

Results from this study indicate that the relationship between foreign ownership and firm performance is mediated by international diversification, such that higher levels of both foreign corporate and foreign institutional ownership lead to higher levels of international diversification, which then lead to higher levels of firm performance. Results from this study also indicate that the competitive environment moderates the relationship between a firm’s level of international diversification and performance, such that the effect of international diversification on performance is greater as the environment becomes more competitive.

Practical implications

This study provides empirical evidence for managers to seriously consider the impact of foreign ownership on decisions involving international diversification, along with competitive environment, when formulating and implementing organizational strategies.

Originality/value

This study extends prior research examining the effects of foreign ownership on firm performance by uniquely showing how international diversification mediates the relationship between foreign ownership and firm performance and how the competitive environment moderates the relationship between international diversification and firm performance.

Details

Review of International Business and Strategy, vol. 29 no. 2
Type: Research Article
ISSN: 2059-6014

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Article
Publication date: 2 March 2012

Hyang Mi Choi, Wonsik Sul and Sang Kee Min

This paper seeks to explore such questions as: “What are the impacts of foreign investors and what are the channels through which foreign investors contribute to or…

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2317

Abstract

Purpose

This paper seeks to explore such questions as: “What are the impacts of foreign investors and what are the channels through which foreign investors contribute to or detracts from firm value in Korea?” It aims to discuss how foreign investors and foreign outside directors interact to enhance firm value.

Design/methodology/approach

Using longitudinal data from the KOSPI200 index in Korea during 2004‐2007, the study examined the direct and interaction effect of foreign blockholders and foreign board members. To address the representativeness of foreign investors, the authors verified the mandates of foreign board members though telephone interviews.

Findings

Foreign block shareholders and foreign outside directors respectively provide expertise and independent monitoring over management. Foreign blockholders' management control via board membership is likely to mitigate leverage of value enhancement when foreign outside directors represent private interests of foreign blockholders. The moderating effect is also supported since foreign ownership concentration has an inverted U‐shaped relationship with value enhancement. The paper confirms that board independence reinforces the positive impact of foreign outside directors on firm value.

Research limitations/implications

This study offers a key to understanding corporate governance in that mutual monitoring and a balance among various types of stakeholders are crucial to value enhancement.

Originality/value

The paper provides clues to the extant diverse findings concerning the impact of foreign investors on firm value. It applies an integrated perspective to the empirical analyses of the impact of foreign investors by giving consideration to the agency – foreign outside directors – to implement management control on behalf of foreign blockholders.

Details

Management Decision, vol. 50 no. 2
Type: Research Article
ISSN: 0025-1747

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Article
Publication date: 1 July 2004

Daniel F.S. Choi and Woramon Clovutivat

The Thai stock market maintains two separate listings for common stocks which have reached foreign ownership limits. Prices on the Foreign Board are typically traded at a…

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578

Abstract

The Thai stock market maintains two separate listings for common stocks which have reached foreign ownership limits. Prices on the Foreign Board are typically traded at a premium relative to prices on the Main Board. The price premium is both a measure and evidence of market segmentation. Thai commercial banks were faced with financial and operational difficulties in the wake of the 1997 financial crisis. To rescue the banking industry, the Thai government relaxed the foreign ownership limit for a ten‐year period. We show in this paper that the Thai banking industry was segmented before the crisis; but when the foreign ownership limits were removed, the banking industry was integrated.

Details

Managerial Finance, vol. 30 no. 7
Type: Research Article
ISSN: 0307-4358

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Article
Publication date: 16 March 2021

Carlos M.P. Sousa, Ji Yan, Emanuel Gomes and Jorge Lengler

The paper examines the impact of export activity on productivity and how this effect is moderated by R&D investment and foreign ownership.

Abstract

Purpose

The paper examines the impact of export activity on productivity and how this effect is moderated by R&D investment and foreign ownership.

Design/methodology/approach

A time-lag effect is taken into account when examining the proposed model. Data are collected from the Annual Industrial Survey of the National Bureau of Statistics of China. A dataset containing 117,340 firms across the sample period (2001–2007) are used to test the hypotheses.

Findings

The results indicate that while R&D investment plays a significant role in strengthening the positive effect of export activity on a firm's productivity, foreign ownership surprisingly has a negative moderating role.

Originality/value

Scholarly interest in the links between export activity and productivity is on the rise. However, the bulk of research has been focused on understanding the effects of export activity on productivity at the country or industry level. Little has been done at the firm level. Another gap in the literature is that the mechanism through which the impact of export activity can be leveraged to enhance the firm's productivity has been largely ignored. To address these issues, the study adopts the learning-by-exporting theory to examine the relationship between export and productivity at the firm-level and how R&D investment and foreign ownership may explain how learning can be leveraged to enhance the firm's productivity. Finally, these relationships are examined in the context of firms from an emerging market, China, which is especially relevant for the learning-by-exporting argument used in this study.

Details

International Marketing Review, vol. 38 no. 3
Type: Research Article
ISSN: 0265-1335

Keywords

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