Family Firms’ Corporate Social Performance: A Calculated Quest for Socioemotional Wealth

This study investigates the engagement of family firms in corporate social responsibility. We first compare their corporate social performance (CSP) to non-family firms. Then, following recent evidence on the heterogeneity of family firms, we examine two factors that may influence CSP within family firms: the level of family control and the governance orientation of the country in which they operate. This research is based on a theoretical framework which considers both agency and socioemotional wealth (SEW) influences on family firms CSR engagements. Overall, we find that family firms exhibit lower CSP than non-family firms. But when focusing on family firms, our analyses show a curvilinear relationship between family control and CSP. At lower levels of control, family owners invest more in social initiatives to protect their SEW. Beyond a threshold level of control that we estimate at 36 % in our sample, economic considerations prevail over SEW and social performance starts decreasing. We also find that family firms operating in stakeholder-oriented countries are more attentive to social concerns than those operating in more shareholder-oriented countries.     

Effects of aid for trade on extensive and intensive margins of greenfield FDI

Using a panel dataset of 105 developing countries for the period 2003–15, this paper assesses the effects of Aid for Trade (AfT) on greenfield FDI flows to the aid‐recipient countries. Particularly, this paper classifies the total dollar value of greenfield FDI flows to each recipient country in terms of four different layers: the extensive and intensive margins of projects as well as the extensive and intensive margins of source countries. Applying the system GMM estimator, this paper finds that AfT not only increases the dollar value of FDI flows to the recipient countries but also helps diversify the greenfield projects and source countries. In addition, this paper finds that AfT has a greater effect for greenfield FDI from donor (developed) countries than from non‐donor (developing) countries. Among the three components of AfT, aid for trade‐related infrastructure and aid for trade policy regulations are found to have positive links with greenfield FDI, irrespective of source‐country groups, yet their effects are larger for developed source countries. In contrast, aid for building productive capacity hinders greenfield FDI flows from non‐donor countries, while it promotes greenfield FDI from donor countries. We offer some explanations for this finding.     

Entry Modes and Firm Performance in a Transition Economy: Evidence from Inward FDI to Romania

The article analyzes the characteristics and performance of foreign direct investment (FDI) to Romania since the 1990s. We provide evidence for some of the commonly advanced propositions about FDI in transition economies, namely the selection of entry and firms’ performance over time and across economic sectors. Contrary to the FDI literature, multinational enterprises in Romania favored greenfield FDI over acquisitions, although this does not apply to oligopolistic and technology intensive industries. Specific relationships between the nationality of the investor, the location and the entry modes decisions are also analyzed. We observed that acquisitions exhibited higher profit margin and turnover compared to greenfield FDI.     

An integrative institutional approach to MNC performance in China

This study adopts an integrative approach that incorporates the resource-based view and institutional theory in its analyses of the performances of multinational corporations in China. Firm-specific resources have been assumed as a unique source of competitive advantages when firms go overseas. However, differences in institutional environments between the host country and the home country can negatively affect the competitiveness generated by resource exploitation. Empirical analysis using the data consisting of 209 Japanese firms operating in China finds that while the exploitation of firm-specific resources improves their performance, institutions in China moderate the positive impact on performance.     

The influence of top management team traits on corporate financial performance in the US

This article aims to study the effect of human capital on the financial performance of the most admired American firms. Human capital is measured in terms of the demographic attributes and the diversity of top managers. The use of panel linear multiple regressions reveals that the most successful firms are characterized by coherent and homogeneous top management teams with moderate tenure and excellent wages. Moreover, the heterogeneity of managers is recommended for fairly young top management teams and for larger firms operating in a turbulent environment. Copyright © 2014 ASAC. Published by John Wiley & Sons, Ltd.     

Efficiency and Ownership Structure: The Case of Poland

We examine the effects of foreign entry on productive efficiency during the Polish investment liberalisation. The performance of foreign acquisitions is compared to foreign firms entering the market through greenfield entry, as well as domestic acquisitions of privatised firms, domestic greenfields and remaining state‐owned (non‐privatised) firms during the period 1995–2000. We find that foreign privatised firms have realised larger productivity gains than all types of domestic firms and that this is not due to higher price‐cost margins, which is consistent with the idea that foreign firms bring in firm‐specific knowledge. Foreign greenfields have the highest average labour productivity, while foreign privatisations show the largest productivity increase.     

Do firms with more alliance experience outperform others with less? A three‐level sigmoid model and the moderating effects of diversification

Whether firms with more alliance experience perform better than those with less and whether the alliance strategy interacts with diversification strategy to shape firm performance are two critical but underexplored questions. To address these queries, this study develops a three‐level sigmoid framework built upon a marginal analysis that contrasts alliance benefits and alliance costs, and considers the moderation of diversification that often closely works with the alliance in shaping firm performance. Empirical results obtained from firms in two alliance‐populated industries support first that the alliance experience‐performance relationship is S‐shaped in that the linkage is negative to alliance novices, positive to alliance experts, and negative again to alliance overusers; and second, that the shape of this sigmoid curve varies systematically between high‐ and low‐diversified firms. Copyright © 2015 ASAC. Published by John Wiley & Sons, Ltd.     

Foreign affiliates' knowledge sourcing from parent firms

This study investigates the factors that influence the extent to which foreign research and development affiliates source knowledge from their parent firms, by developing theoretical hypotheses that predict patterns of foreign affiliates' knowledge sourcing according to their technological capabilities at multiple levels (firm, industry, and country). We use cross‐border mergers and acquisitions and patent citation data from Fortune Global 500 firms to test our theoretical arguments. The findings suggest that a parent firm's foreign affiliate ownership, industry‐level R&D intensity, and home–host country differences in technological capabilities increase foreign affiliates' knowledge sourcing from their parent firms.     

The link between product diversification and performance among Spanish manufacturing firms: Analyzing the role of firm size

This study sheds additional light on the product diversification‐performance relationship for firms in a country having recently attained an advanced economy status in our period of analysis. We assume there will be an inverted U‐shaped relationship and use a sample of small, medium, and large Spanish manufacturing firms between 1994 and 2008. Our findings provide solid support for this assumption, and are identical when the sample consists of small, medium, and large firms and of large firms alone. Our results also suggest that the larger the firm, the higher the optimal level of diversification. Panel data models are used to control for unobservable heterogeneity and potential endogeneity problems. Copyright © 2015 ASAC. Published by John Wiley & Sons, Ltd.     

Similarities and differences among cross-border M&A and greenfield FDI determinants: Evidence from Asia and Oceania

Firms choose either cross-border M&A or greenfield foreign direct investment (FDI) when expanding their operations overseas. In this study, by focusing on Japanese firms pursuing FDI in emerging countries in Asia and Oceania, we provide empirical evidence of the similarities and differences in cross-border M&A and greenfield FDI determinants. We derive the following four main conclusions. First, an increase in host-country population size and decreases in per capita income and corporate tax rates generally attract both inward cross-border M&A and greenfield FDI to the host country. Second, however, a home-country firm tends to choose cross-border M&A rather than greenfield FDI when the host country sufficiently implements shareholder rights laws and the firm tends to choose greenfield FDI rather than cross-border M&A when the host country adequately enforces intellectual property rights laws. Third, a firm tends to choose greenfield FDI when the firm already has regional networks in the host country and choose cross-border M&A when the purpose of the firm's overseas operations is to establish sales distribution channels. Finally, a firm pursuing cross-border M&A experiences higher cumulative abnormal returns in its stock prices following the investment, while a firm pursuing greenfield FDI experiences increases in its stock prices immediately before the investment.     

The influences of governance quality on equity-based entry mode choice: The strengthening role of family control

This study examines the possible heterogeneity of governance quality's influence on entry mode decisions made by firms with different degrees of family control. When entering a country with low governance quality, ceding control of the subsidiary in exchange for local partners’ help enables foreign firms to tackle institutional flaws. However, such a motivation diminishes as governance quality increases. This study thus hypothesizes that firms tend to choose WOSs over JVs when entering a host country with high governance quality.Firms controlled by family members, due to concerns regarding the preservation of socioemotional wealth, prefer to maintain high ownership levels of their affiliates. This study thus hypothesizes that firms with a higher degree of family control are even more likely to choose WOSs when entering a country with high governance quality. The results support the hypotheses.     

Out of Africa: The role of institutional distance and host-home colonial tie in South African Firms’ post-acquisition performance in developed economies

The colonial ties and institutional distance affect the cross-border acquisition performance of internationalizing South African firms who acquire targets in developed economies. Along with these main effects, this paper examines the moderating effect of the colonial tie on the effects of institutional distance on post-acquisition long-term operating performance. Using data on South African acquisitions in developed economies, this study finds that the colonial tie has a negative impact on the long-term operating performance of South African acquirers. Yet, the colonial tie also moderates the effects of institutional distance. This work contributes to the discussion on host-home country institutional distance and its impact on post-acquisition long-term operating performance and how colonial past can influence the performance of acquirers from South Africa and other such countries with colonial history.     

Impact of industry sector on corporate diversification and firm performance: Evidence from Indian business groups

Prior business group (BG) studies implicitly assume that corporate diversification‐firm performance relationships are uniform across industry sectors. This generalization may lead to research implications that are not equally true for BG‐affiliated manufacturing and service firms. Drawing on strategy and marketing literature, this research addresses this scholarly gap. Our empirical analysis of a large sample of BG‐affiliated Indian firms over a five‐year period (2004‐2008) indicates that the influence of corporate diversification on firm performance is greater for affiliated service firms than affiliated manufacturing firms. Results also indicate that the influence of BG size and diversity on diversification‐firm performance relationship varies significantly depending on whether the focal firm belongs to the manufacturing or service sector. Firm's share ownership does not generate similar influence. Copyright © 2015 ASAC. Published by John Wiley & Sons, Ltd.     

CEO Attributes,Board Composition,and Acquirer Value Creation: A Canadian Study

We examined CEO attributes, board composition, and ownership structure for their relationship to the share performance of the acquiring company around the acquisition announcement. Based on 273 acquisitions by Canadian firms from 1998 through 2002, we have shown that the levels of CEO and director ownership as well as the level of board independence were positively associated with the short‐term financial performance of the acquirer. Board size was negatively related to value creation. Finally, cash‐based deals and cross‐border transactions were also positively related to increases in shareholder wealth for the acquirer. Copyright © 2011 ASAC. Published by John Wiley & Sons, Ltd.     

Excess control and the risk of corporate expropriation: Canadian evidence

Corporate governance in Canada was examined by looking at the ultimate ownership structure of a large sample of publicly traded firms. Results suggest that small investors in Canada are vulnerable to corporate expropriation in large firms. Despite the similarities in institutional indexes, Canada displays different patterns of ownership structure than sister Anglo‐Saxon countries (the U.S. and the U.K). More importantly, results suggest that excess control drives expropriation over and above the typical Jensen type of agency problems that are attributable to regular separation of ownership and control. Equally important, firms headquartered in Quebec appear to be undervalued vis‐à‐vis firms headquartered in the rest of Canada. Copyright © 2007 ASAC. Published by John Wiley & Sons, Ltd.     

Towards a behavioral theory of MNC response to political risk and uncertainty: The role of CEO wealth at risk

Drawing on behavioral agency research, we examine how CEO equity wealth at risk of loss in the form of restricted stock influences the response of multinational corporations (MNCs) to political risk and political uncertainty. In a sample of 14,765 cross-border greenfield investments and full acquisitions announced by U.S. firms from 2004 to 2016, we find that while greater CEO equity wealth at risk of loss in the form of restricted stock strengthens the (positive) relationship between political risk and MNCs’ choice of greenfield investments over full acquisition, CEO equity wealth at risk of loss does not influence the relationship between political uncertainty and MNCs’ choice of greenfield investments. We contribute to international business theory by introducing a behavioral theory of MNC responses to adverse host country political environments. As such, unlike previous studies that have treated political risk and political uncertainty interchangeably, our study highlights the need to differentiate between political risk and political uncertainty as related yet distinct concepts.     

Do Foreign Firms in China Incur a Liability of Foreignness? The Local Chinese Firms’ Perspective

Liability of foreignness (LOF) has been one of the building blocks of multinational enterprise theory development, but we have limited knowledge about the liability of foreignness in the context of multinationals operating in developing countries. This study suggests that in a developing country like China, foreignness may still exist, but its negative impact on foreign firms’ performance may have become insignificant. Local Chinese firms were found to enjoy significant location‐based advantages over their foreign counterparts, contributing to liability of foreignness. However, the adverse effects of liability of foreignness on foreign firms appear to be offset by the foreign firms’ superior firm‐specific and multinationality advantages over local Chinese firms. Further, the location‐based advantages that foreign firms have built up over time further serve to strengthen their overall competitive position in China. © 2014 Wiley Periodicals, Inc.     

Defining Ownership: An empirical assessment of the ownership measures

Ownership is considered to be one of the crucial governance mechanisms; however, there have been no systematic attempts at validating the construct and measures used to operationalize ownership. We review the current understanding of ownership and the measures used by each perspective, namely blockholder/dispersed shareholder perspective, owner identity perspective, and aggregated ownership perspective. We thereafter critique each of these perspectives, offer hypotheses regarding their validity, and empirically assess each ownership measure vis‐à‐vis firm performance outcomes. We utilize a sample of 3,990 US firms to test our hypotheses and find no consistent results for the blockholder measure, or for the owner identity measure. However, the aggregated ownership measure consistently accounts for significant increases in explanation of variance in firm performance. Copyright © 2018 ASAC. Published by John Wiley & Sons, Ltd.     

Earnings persistence,fundamentals, and anticipation of breaking earnings strings

Using a sample of firms with consecutive earnings growth for more than 20 quarters (earnings strings), I assess the relationship between earnings persistence and the extent to which investors are able to anticipate breaks of earnings strings. I find that firm‐specific earnings persistence exhibits a concave trend during earnings strings. Stock returns are significantly and positively associated with earnings persistence. Upon breaks of earnings strings, investors’ reactions are more negative for firms with higher earnings persistence—especially those with smaller institutional holdings and analyst coverage, and those with insider selling activities—before the break. Additional analyses show that variations in firms’ economic performance (fundamentals) explain the varying earnings persistence during earnings strings. Copyright © 2015 ASAC. Published by John Wiley & Sons, Ltd.     

Malaysian Multinational Firms and the Management of their Subsidiaries

There are limited studies on multinational enterprises from lesser developed and smaller Asian countries and even less attention given to the area of subsidiary management in Asian firms. This article contributes to this knowledge gap with empirical evidence from a study of nine case studies of firms from Malaysia, a rapidly developing country. Differences as well as commonalities in the management of their subsidiaries were found among sample firms. These findings are discussed in relation to the literature on management of subsidiaries in other Asian and developed countries’ firms. Implications for research and limitations of the study are covered.