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

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  • Makoto Nakano
  • Pascal Nguyen

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.

Suggested Citation

  • Makoto Nakano & Pascal Nguyen, 2013. "Foreign ownership and firm performance: evidence from Japan's electronics industry," Applied Financial Economics, Taylor & Francis Journals, vol. 23(1), pages 41-50, January.
    • Handle: RePEc:taf:apfiec:v:23:y:2013:i:1:p:41-50
    DOI: 10.1080/09603107.2012.705425
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    Cited by:

    1. Tleubayev, Alisher & Bobojonov, Ihtiyor & Gagalyuk, Taras & García Meca, Emma & Glauben, Thomas, 2021. "Corporate governance and firm performance within the Russian agri-food sector: does ownership structure matter?," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 24(4), pages 649-668.
    2. Mai, Nhat Chi, 2020. "The Roles of Foreign Ownership and Growth Opportunity amid the Trade War: Evidence from an Emerging Country," OSF Preprints 49cdt, Center for Open Science.
    3. Nguyen, Tuan & Locke, Stuart & Reddy, Krishna, 2014. "A dynamic estimation of governance structures and financial performance for Singaporean companies," Economic Modelling, Elsevier, vol. 40(C), pages 1-11.
    4. Quan Tran & Anh‐Tuan Doan & Thao Tran, 2021. "Small and medium enterprises' credit access, ownership structure and job development," Australian Economic Papers, Wiley Blackwell, vol. 60(4), pages 710-735, December.
    5. Ngasuko, Tri Achya, 2017. "Foreign Ownership of Insurance Companies: Indonesian Case 2012-2015," MPRA Paper 99152, University Library of Munich, Germany, revised 01 Apr 2017.
    6. Schmid, Stefan & Roedder, Felix, 2021. "Gaijin invasion? A resource dependence perspective on foreign ownership and foreign directors," International Business Review, Elsevier, vol. 30(6).
    7. , Aisdl, 2020. "The Roles of Foreign Ownership and Growth Opportunity amid the Trade War: Evidence from an Emerging Country," OSF Preprints 7w2m9, Center for Open Science.
    8. Kuo‐Cheng Kuo & Wen‐Min Lu & Thanh Nhan Dinh, 2020. "Firm performance and ownership structure: Dynamic network data envelopment analysis approach," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 41(4), pages 608-623, June.
    9. Haroon ur Rashid Khan & Waqas Bin Khidmat & Osama Al Hares & Naeem Muhammad & Kashif Saleem, 2020. "Corporate Governance Quality, Ownership Structure, Agency Costs and Firm Performance. Evidence from an Emerging Economy," JRFM, MDPI, vol. 13(7), pages 1-35, July.
    10. Kabir, Md Nurul & Miah, Mohammad Dulal & Ali, Searat & Sharma, Parmendra, 2020. "Institutional and foreign ownership vis-à-vis default risk: Evidence from Japanese firms," International Review of Economics & Finance, Elsevier, vol. 69(C), pages 469-493.
    11. Hanh Thi My Le & Qian Long Kweh & Irene Wei Kiong Ting & Mohammad Nourani, 2022. "CEO power and earnings management: Dual roles of foreign shareholders in Vietnamese listed companies," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(1), pages 1240-1256, January.
    12. Takahiro NISHI, 2015. "Corporate diversification and board composition in Japanese electronics corporations," International Journal of Business and Management, International Institute of Social and Economic Sciences, vol. 3(2), pages 27-44, May.
    13. 子, 鬼谷, 2020. "The Roles of Foreign Ownership and Growth Opportunity amid the Trade War: Evidence from an Emerging Country," OSF Preprints cr7xp, Center for Open Science.
    14. Quan Tran & Anh‐Tuan Doan & Thao Tran, 2022. "What are the drivers of SMEs' financial performance? The interaction of intellectual capital and ownership," Australian Economic Papers, Wiley Blackwell, vol. 61(4), pages 751-777, December.
    15. Nguyen, Tuan & Locke, Stuart & Reddy, Krishna, 2015. "Does boardroom gender diversity matter? Evidence from a transitional economy," International Review of Economics & Finance, Elsevier, vol. 37(C), pages 184-202.

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