The More the Better? Foreign Ownership and Corporate Performance in China

Greenaway, D.; Guariglia, A.; Yu, Z.

Abstract

We examine the relationship between the degree of foreign ownership and performance of recipient firms, using of 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 foreign ownership reaches beyond 64%. This suggests that some domestic ownership is necessary to ensure optimal performance. We rationalize these findings with a model of a joint-venture, where strategic interactions between a foreign and a domestic owner’s inputs may lead to an inverse U-shaped ownership-performance relationship.

Citation

Greenaway, D., Guariglia, A., & Yu, Z. (2014). The More the Better? Foreign Ownership and Corporate Performance in China. European Journal of Finance, 20(7-9), 681-702. https://doi.org/10.1080/1351847x.2012.671785

• Journal Article Type: Article
• Acceptance Date: Feb 28, 2012
• Online Publication Date: Jun 22, 2012
• Publication Date: 2014
• Deposit Date: Jan 23, 2012
• Journal: European Journal of Finance
• Print ISSN: 1351-847X
• Electronic ISSN: 1466-4364
• Publisher: Taylor and Francis Group
• Peer Reviewed: Peer Reviewed
• Volume: 20
• Issue: 7-9
• Pages: 681-702
• DOI: https://doi.org/10.1080/1351847x.2012.671785
• Keywords: Foreign ownership, Corporate performance, China.
• Public URL: https://durham-repository.worktribe.com/output/1529653