Foreign Ownership and Financial Performance

Download or read book Foreign Ownership and Financial Performance written by Belen Gill-de-Albornoz and published by . This book was released on 2018 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study how foreign ownership relates to financial performance in a sample of large privately held Spanish subsidiaries. We find that, although foreign group subsidiaries report higher sales turnover than subsidiaries of local groups, they lose their sales advantage at the operating income level. Additionally, the empirical evidence reveals that the cause for this loss has to do with the higher wages that foreign group subsidiaries allegedly pay to their employees, since, when the wages expense is excluded from the profit-related measures and CFOs, firms under foreign control have higher financial performance than those controlled by local groups. We also test whether the productivity level in the parent company's home country, compared to that in Spain, has an effect on the relation investigated. Results suggest that when FDI comes from a country with productivity levels higher than Spain the negative association between foreign shareholding and firm performance is mitigated.