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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 premium…

608

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

Keywords

Book part
Publication date: 4 April 2024

De-Wai Chou, Pi-Hsia Hung and Lin Lin

This study focuses on listed and over-the-counter (OTC) companies in the Taiwan Stock Exchange. It found that an increase in the ownership proportion of institutional investors…

Abstract

This study focuses on listed and over-the-counter (OTC) companies in the Taiwan Stock Exchange. It found that an increase in the ownership proportion of institutional investors (INs), including foreign investors, investment trusts, and dealers can enhance the informativeness of stock prices. The relationship between these factors follows an inverted U-shaped pattern, indicating that excessively high ownership ratios can actually lead to a decrease in the informativeness of stock prices. Additionally, increasing the ownership proportions of foreign investors and investment trusts can reduce the risk of stock price collapse, while dealers show no significant relationship in this regard. This study also reveals that the technical variable of the price deviation rate is an important explanatory factor for post-collapse returns. It is positively correlated with the magnitude of the price decline after a collapse, meaning that stocks with weaker pre-collapse performance experience larger post-collapse declines. When the data during the 2020 pandemic period are excluded, changes in foreign ownership ratios show a significant positive correlation with postcrash returns in both the long and short term. The significant correlation in the short term may be due to a high proportion of foreign ownership. Any reduction in this could put pressure on stock prices, and retail investors may follow suit and sell-off, using foreign investors as a reference. The significant correlation in the long term might be due to foreign investors themselves possibly also trying to avoid the pressure that their own short-term sell-offs could exert on stock prices. The changes in the ownership ratios of investment trusts and dealers indicate that medium and long-term changes have a significant impact on postcrash returns, while the changes in the major players' ownership show no significant correlation. When data from 2020 are included in the analysis, the significance of all INs decreases.

Details

Advances in Pacific Basin Business, Economics and Finance
Type: Book
ISBN: 978-1-83753-865-2

Keywords

Article
Publication date: 16 March 2020

Quoc Trung Tran

This paper investigates the effect of foreign ownership on corporate investment efficiency in an emerging market.

1274

Abstract

Purpose

This paper investigates the effect of foreign ownership on corporate investment efficiency in an emerging market.

Design/methodology/approach

This paper employs the investment-investment opportunities sensitivity to proxy for investment efficiency. Corporate investment and investment opportunities are measured by capital expenditure and Tobin's Q respectively. Control variables include state ownership, firm profitability, cash flow, financial leverage, firm size, bank debt, asset tangibility and financial distress. The research sample includes 5,502 firm-years from 621 firms listed in Vietnamese stock market from 2007 to 2017.

Findings

We find that foreign ownership negatively affects corporate investment efficiency. Furthermore, we continue to examine the effects of foreign ownership with financially unconstrained and constrained firms that are classified based on the annual medians of Kaplan and Zingales (1997) score, firm size and dividend payout ratio. We find that the negative relationship between foreign ownership and investment efficiency is stronger in financially unconstrained.

Originality/value

Prior research shows that foreign ownership is positively related to corporate investment efficiency. However, in Vietnamese stock market, foreign investors may prefer safe business activities as a response to uncertainty in the business environment, ineffective legislations on corporate governance and their informational disadvantage. Therefore, in this paper, we argue that foreign ownership negatively affects Vietnamese firms' investment efficiency. Risk-adverse foreign investors make firms lose some profitable investment opportunities and thus decrease their investment efficiency.

Details

International Journal of Emerging Markets, vol. 15 no. 6
Type: Research Article
ISSN: 1746-8809

Keywords

Article
Publication date: 1 May 2002

Doren D. Chadee

This paper investigates the foreign ownership structure of service equity joint ventures (EJVs) in China. In less than 20 years, China has emerged from a closed economy to become…

4052

Abstract

This paper investigates the foreign ownership structure of service equity joint ventures (EJVs) in China. In less than 20 years, China has emerged from a closed economy to become the second largest recipient of foreign direct investment (FDI) in the world. Now that China is a member of the World Trade Organisation, liberalisation of FDI is expected to accelerate even further. Despite the fact that an increasing proportion of FDI in China is in the form of equity joint ventures in the service sector, little is known of the ownership structure of service EJVs. Using a database of 6,430 foreign EJVs, in China from 1984 to 1996, this paper shows that foreign equity ownership differs significantly between service and manufacturing EJVs with foreign ownership generally being higher in service EJVs. The overall results also suggest that the gradual liberalisation of FDI in the service sector by Chinese authorities has had a positive effect on foreign equity ownership.

Details

International Journal of Service Industry Management, vol. 13 no. 2
Type: Research Article
ISSN: 0956-4233

Keywords

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

Article
Publication date: 19 February 2021

Quoc Trung Tran

This paper aims to investigate the effect of foreign ownership on cost of debt financing in an emerging stock market.

Abstract

Purpose

This paper aims to investigate the effect of foreign ownership on cost of debt financing in an emerging stock market.

Design/methodology/approach

Cost of debt is a function of foreign ownership. Control variables include state ownership, firm profitability, financial leverage, Tobin's Q, asset growth, firm size and asset tangibility. The research sample includes 3,263 observations from 405 firms listed in Vietnamese stock market during the period 2009–2017.

Findings

The authors find that foreign ownership negatively affects cost of debt and this effect is stronger in non-state-owned enterprises and financially constrained firms.

Originality/value

Prior research shows that ownership structure is a key determinant of debt financing cost in many developed markets. This paper contributes to the literature of emerging market finance by showing that foreign ownership reduces cost of debt financing.

Details

International Journal of Emerging Markets, vol. 17 no. 9
Type: Research Article
ISSN: 1746-8809

Keywords

Article
Publication date: 29 June 2017

Christian Corsi and Antonio Prencipe

The purpose of this paper is to study the impact of foreign venture capital (VC)/private equity (PE) ownership and other types of foreign investors on the access to external…

1120

Abstract

Purpose

The purpose of this paper is to study the impact of foreign venture capital (VC)/private equity (PE) ownership and other types of foreign investors on the access to external finance, in terms of credit provision, by the independent high-tech small and medium enterprises (SMEs) in the European context.

Design/methodology/approach

The research methodology is based on the analysis of a panel sample consisting of 1,138 firms from 23 European Union countries for the period 2006-2015. To statistically test the two defined research hypotheses, a panel model was run using 2SLS estimation.

Findings

The findings show that foreign ownership has a positive but partial role in improving the availability of external funding for independent high-tech SMEs. Foreign VC/PE ownership seems to facilitate the global accessibility of external financing but not the access to bank lending; on the contrary, other forms of foreign ownership (excluding VC/PE) seem to increase only the access to bank lending.

Practical implications

In order to open their businesses to a global spectrum of investment opportunities and increase the potentials of full development, small independent entrepreneurs should become attentive to the role of foreign investors. Further, policy actions need to stimulate an international vision of the way of doing business among the entrepreneurial contexts of high-tech SMEs.

Originality/value

The research fills a literature gap on the role of foreign ownership in mitigating the financing limitations of independent high-tech SMEs. Additionally, as independent high-tech SMEs differ from non-independent firms, the financing constraints and information asymmetry faced by independent firms are critical and pivotal to explore.

Details

Journal of Small Business and Enterprise Development, vol. 24 no. 4
Type: Research Article
ISSN: 1462-6004

Keywords

Article
Publication date: 19 March 2021

Ruchi Kansil

The paper examines the differential impact of various firm characteristics on firm value across various threshold levels of foreign ownership.

Abstract

Purpose

The paper examines the differential impact of various firm characteristics on firm value across various threshold levels of foreign ownership.

Design/methodology/approach

Using a panel of 408 Indian publicly listed companies for the period during 2010–2018, a fixed-effect panel threshold regression model is adapted to study the threshold effects between foreign ownership and firm value. Tobin's Q is used as a proxy for firm value.

Findings

The study identifies three threshold levels, that is, four threshold regions in which foreign ownership changes its slope considerably. Various firm characteristics impact firm value differently in these four regions.

Research limitations/implications

The study employs observations of the past nine years on variables identified as firm characteristics impacting firm value. Some variables are dropped due to the problem of multicollinearity. The employed variables may not be exhaustive in nature.

Practical implications

The present study implies that there exists no impact of foreign ownership on the value of the firm. Foreign investors invest for financial considerations and not with the objective of governing the firms. The governance effect of foreign investments is negligible, so their activism in the firms needs to be encouraged.

Originality/value

The study employs a novel approach to study the impact of foreign ownership on firm value applying fixed effect panel data threshold regression, considering foreign ownership as a proxy of corporate governance.

Details

World Journal of Science, Technology and Sustainable Development, vol. 18 no. 2
Type: Research Article
ISSN: 2042-5945

Keywords

Article
Publication date: 14 August 2021

Shoukat Ali, Ramiz Ur Rehman, Bushra Sarwar, Ayesha Shoukat and Muhammad Farooq

The purpose of this paper is to empirically investigate the impact of board financial expertise on the shareholding of foreign institutional investors in an emerging equity market…

Abstract

Purpose

The purpose of this paper is to empirically investigate the impact of board financial expertise on the shareholding of foreign institutional investors in an emerging equity market of China and to explore whether ownership concentration moderates the relationship between board financial expertise and foreign institutional investment.

Design/methodology/approach

To test the hypothesized relationships, this study uses panel data regression models, i.e. static (fixed effect and random effect) and dynamic (two-step generalized methods of moments) models. Further, to control the possible endogeniety issue, this study uses two instrumental variables, namely, board size and industry average financial expertise of board to proxy board financial expertise. This study covers a period from 2006 to 2015 for 169 listed Chinese firms.

Findings

The results revealed that foreign institutional investors positively perceived board financial expertise and holds more shareholdings with the increasing level of financial experts at boards of directors. Moreover, ownership concentration positively moderated this relationship. It means that in highly concentrated firms, the board financial expertise conveys a stronger signal to foreign institutional investors that firms can manage financial resources rationally by controlling negative effects of ownership concentration. Further, the robustness model also confirmed the relationship between board financial expertise and foreign institutional shareholdings.

Originality/value

To the best of authors’ knowledge, this is the first study to investigate board-level financial expertise as a determinant of foreign institutional ownership. Further, no previous study has used ownership concentration as a contextual variable on the relationship between board financial expertise and foreign institutional investment.

Details

Review of International Business and Strategy, vol. 32 no. 3
Type: Research Article
ISSN: 2059-6014

Keywords

Article
Publication date: 14 September 2018

Nigel Driffield, Kai Sun and Yama Temouri

This paper aims to examine the relationship between foreign ownership and firm performance, using an approach which the authors show is more advanced than existing methods, and…

Abstract

Purpose

This paper aims to examine the relationship between foreign ownership and firm performance, using an approach which the authors show is more advanced than existing methods, and more aligned with accepted theory and conceptual frameworks developed in international business. The authors demonstrate that simply relying on a binary distinction between foreign and domestic firms ignores much of the information regarding the importance of ownership structure and is disconnected from the wider literature on ownership structure, motivations for Foreign Direct Investment (FDI) and performance.

Design/methodology/approach

The authors illustrate this by using a threshold estimation method to endogenously uncover the level of foreign ownership up to which the transfer of foreign firm advantage from the parent company to the affiliate is the strongest.

Findings

The results show that for Germany, Poland, Italy and the UK, there are significantly different thresholds of foreign ownership over the period, 2001-2010. Due to non-linearities and different thresholds, the authors argue that before one can entertain secondary considerations concerning foreign firm impact on host countries, one needs to apply the appropriate approach.

Originality/value

This is the first paper that uses an endogenous threshold approach on a large firm level data set to show that there are significant differences and non-linearities in the relationship between foreign ownership and productivity.

Details

Multinational Business Review, vol. 26 no. 3
Type: Research Article
ISSN: 1525-383X

Keywords

11 – 20 of over 26000