Foreign ownership and firm performance: Evidence from Japan's electronics industry

Pascal Nguyen and Makoto Nakano
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Makoto Nakano: Faculty of Commerce and Management - Hitotsubashi University

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Abstract: Foreign investors have in recent years increased their ownership of Japanese firms. Has this greater involvement contributed to improve firm performance? We show that the answer depends on the assumptions regarding the unobservable firm effects. If the latter are assumed to be time invariant, as in most existing studies, the influence of foreign investors appears to be positive. However, unobserved firm characteristics are unlikely to be constant in the case of electronics firms. Using dynamic panel data estimation, we show that the effect of foreign ownership on operating profits has been initially insignificant, but is starting to show up strongly in the more recent period. On the other hand, the immediate impact has been to raise expectations about future firm performance.

Keywords: dynamic panel; GMM; foreign investors; performance; unobserved heterogeneity (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (13)

Published in Applied Financial Economics, 2013, 23/2013 (1), pp.41-50. ⟨10.1080/09603107.2012.705425⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-01368966

DOI: 10.1080/09603107.2012.705425

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