The more the better? Foreign ownership and corporate performance in China

Sir David Greenaway (), Alessandra Guariglia and Zhihong Yu ()

The European Journal of Finance, 2014, vol. 20, issue 7-9, 681-702

Abstract: We examine the relationship between the degree of foreign ownership and performance of recipient firms, using a panel of 21,582 Chinese firms over the period 2000-2005. We find that joint-ventures perform better than wholly foreign-owned and purely domestic firms. Although productivity and profitability initially rise with foreign ownership, they start declining once it reaches a certain point. This suggests that some domestic ownership is necessary to ensure optimal performance. We referred these findings to a model of a joint-venture, where strategic interactions between a foreign and a domestic owner's inputs may lead to an inverted U -shaped ownership-performance relationship.

Date: 2014
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Working Paper: The More the Better? Foreign Ownership and Corporate Performance in China (2009)
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DOI: 10.1080/1351847X.2012.671785

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