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Shared Governance: Institutional Investors as a Counterbalance to the State in State Owned Multinationals

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  • He, Xiaoming
  • Eden, Lorraine
  • Hitt, Michael A.

Abstract

State owned multinational enterprises (SMNEs) are entities that are partly or wholly owned by the state and that engage in foreign direct investment. SMNEs with partial state ownership share equity ownership with private investors, some of which may be institutional investors. We argue that equity ownership by institutional investors can provide a counterweight to state ownership, and their shared governance can improve SMNE strategic decision making on international diversification. Institutional investors, however, need strong formal institutions to perform their shared governance role effectively. Because formal institutions are typically weaker in developing countries, institutional investors likely play a less effective role in SMNEs located in developing countries. We test our arguments on the international diversification decisions of 253 listed SMNEs from 42 home countries over the 2002–2007 period, finding substantial support for our hypotheses. Our study offers new insights on the role of institutional investors in the international diversification of state owned multinationals.

Suggested Citation

  • He, Xiaoming & Eden, Lorraine & Hitt, Michael A., 2016. "Shared Governance: Institutional Investors as a Counterbalance to the State in State Owned Multinationals," Journal of International Management, Elsevier, vol. 22(2), pages 115-130.
    • Handle: RePEc:eee:intman:v:22:y:2016:i:2:p:115-130
    DOI: 10.1016/j.intman.2016.01.004
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    Cited by:

    1. Abdul Wahab, Nor Shaipah & Ntim, Collins G. & Tye, Wei Ling & Shakil, Mohammad Hassan, 2022. "Book-tax differences and risk: Does shareholder activism matter?," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 48(C).
    2. Panicker, Vidya Sukumara & Upadhyayula, Rajesh Srinivas & Sivakumar, Sandeep, 2022. "Internationalization of hybrid state-owned enterprises from emerging markets: Institutional investors as enablers," Journal of Business Research, Elsevier, vol. 151(C), pages 409-422.
    3. Gonzalo Molina-Sieiro & Katia M. Galdino & R. Michael Holmes, 2023. "Ownership types, institutions, and the internationalization of emerging economy new ventures: evidence from Africa," Small Business Economics, Springer, vol. 60(3), pages 1121-1145, March.
    4. da Silva, Fernando Moreira & Ferreira, Manuel Portugal & Serra, Fernando Ribeiro & Pinto, Cláudia Frias, 2019. "Government attenuation of institutional inefficiencies in capital markets: influence on the financial performance of Brazilian electricity distribution companies," Utilities Policy, Elsevier, vol. 60(C), pages 1-1.
    5. Bai, Tao & Chen, Stephen & Xu, Youzong, 2021. "Formal and informal influences of the state on OFDI of hybrid state-owned enterprises in China," International Business Review, Elsevier, vol. 30(5).
    6. Ren, Monica & Manning, Stephan & Vavilov, Stanislav, 2019. "Does state ownership really matter? The dynamic alignment of China's resource environment and firm internationalization strategies," Journal of International Management, Elsevier, vol. 25(3), pages 1-1.
    7. Ziliang Deng & Jiayan Yan & Pei Sun, 2020. "Political Status and Tax Haven Investment of Emerging Market Firms: Evidence from China," Journal of Business Ethics, Springer, vol. 165(3), pages 469-488, September.
    8. Keilla Dayane Silva-Oliveira & Edson Keyso Miranda Kubo & Michael J. Morley & Rodrigo Médici Cândido, 2021. "Emerging Economy Inward and Outward Foreign Direct Investment: A Bibliometric and Thematic Content Analysis," Management International Review, Springer, vol. 61(5), pages 643-679, October.
    9. Panicker, Vidya Sukumara & Georgiadou, Elena & Hodgkinson, Ian R., 2024. "Generous to a fault: Differential impact of CSR investments on financial gains in Indian market multinationals," Journal of International Management, Elsevier, vol. 30(3).
    10. Klishevich, Daria & Panibratov, Andrei, 2024. "The omnipresence of the state and its effect on the internationalization of companies: The Russian variety of state capitalism," Journal of International Management, Elsevier, vol. 30(4).
    11. Cuervo-Cazurra, Alvaro & Li, Cheng, 2021. "State ownership and internationalization: The advantage and disadvantage of stateness," Journal of World Business, Elsevier, vol. 56(1).
    12. Adeyemi Adebayo & Barry Ackers, 2023. "Theorising hybridity in state-owned enterprises (SOEs)," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 27(4), pages 1249-1275, December.

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