The effect of the degree of foreign ownership on firms' performance

Hintošová Aneta Bobenič () and Kubíková Zuzana ()
Additional contact information
Hintošová Aneta Bobenič: University of Economics in Bratislava, Faculty of Business Economics with seat in Košice, Department of Management, Tajovského 13, 041 30 Košice, Slovakia.
Kubíková Zuzana: University of Economics in Bratislava, Faculty of Business Economics with seat in Košice, Department of Management, Tajovského 13, 041 30 Košice, Slovakia.

Review of Economic Perspectives, 2016, vol. 16, issue 1, 29-44

Abstract: A large number of studies have compared the performance of foreign-owned and domestic firms. However, only a limited number of studies have investigated the effect of the degree of foreign ownership on a firm's performance. We attempt to fill this gap in the literature by conducting research that distinguishes not only between domestic and foreign-owned firms, but also between wholly and partly foreign-owned firms. We also examine the possible non-linearity of the performance-ownership relationship. We divide the firms in our study into three groups by their ownership - domestic, foreign, and joint ventures. We use a regression analysis to explore whether foreign ownership influences the firms' performance, measured by several variables such as profitability, innovation performance (measured by gross expenditures on research and development activities), numbers of employees involved in research and development, production, value added, leverage and net working capital intensity. The results of our research indicate that there is a statistically significant difference in firms' performance as a result of foreign ownership in all variables except the number of research and development employees and leverage. Moreover, we show that foreign ownership and performance are linked by an inverted U-shaped relationship. A firm’s performance increases with greater foreign ownership up to the range of 61-65 %, and declines thereafter.

Keywords: performance; foreign ownership; foreign investor; joint ventures; Slovak republic (search for similar items in EconPapers)
JEL-codes: F23 G32 L25 (search for similar items in EconPapers)
Date: 2016
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://doi.org/10.1515/revecp-2016-0003 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:vrs:reoecp:v:16:y:2016:i:1:p:29-44:n:3

DOI: 10.1515/revecp-2016-0003

Access Statistics for this article

Review of Economic Perspectives is currently edited by Antonín Slaný

More articles in Review of Economic Perspectives from Sciendo
Bibliographic data for series maintained by Peter Golla ().