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Hysteresis in adjusting the ownership structure of foreign subsidiaries

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  • Axarloglou, Kostas
  • Kouvelis, Panos

Abstract

In this paper we study the insight that multinational companies might delay the adjustment of the ownership structure of their foreign subsidiaries despite the fact that the fundamentals call for an immediate adjustment (hysteresis). Based on company-level data, we empirically investigate the company and industry conditions that influence the strength of the hysteresis in adjusting this ownership structure. Exchange rate volatility and adjustment cost strengthen the hysteresis in ownership adjustment decisions, while the growth of sales in the foreign market weakens it.

Suggested Citation

  • Axarloglou, Kostas & Kouvelis, Panos, 2007. "Hysteresis in adjusting the ownership structure of foreign subsidiaries," International Business Review, Elsevier, vol. 16(4), pages 494-506, August.
    • Handle: RePEc:eee:iburev:v:16:y:2007:i:4:p:494-506
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