Foreign Ownership and Corporate Financial Decision Making: A Review and Future Research Agenda

Mandra Lazuardi Kitri, Sudarso Kaderi Wiryono, Yunieta Anny Nainggolana


Individuals, firms, and even countries face scarcity due to limited resources. To overcome this problem, especially in the need for capital resources, firms and countries try to acquire additional capital externally through foreign investment. Previous research has been conducted to examine the effect of foreign ownership on a firm’s decision-making and performance. However, the systematic literature review shows that the results are still inconclusive and bring confusion for firms and governments in determining their strategy for promoting foreign investment. There are two gaps identified surrounding current research on foreign ownership that needs special attention. First, most research considers foreign ownership as an ownership type and puts less attention on the actual ownership types. Second, research has found that different characteristics of the home or host country involved in foreign investment may moderate the relationship between foreign ownership and a firm’s decision-making but only considers a one-sided observation of country characteristics (home or host country only). This research proposes future research agenda in examining how different foreign owner’s ownership types affect a firm’s decision-making, risk, and performance and whether country characteristics differences moderate the relationships between foreign owner’s ownership types, firm’s decision-making, risk, and performance.

Individu, perusahaan, dan bahkan negara menghadapi persoalan kelangkaan akibat terbatasnya sumber daya. Untuk menghadapi hal tersebut, terutama terkait dengan kebutuhan modal, perusahaan dan negara berupaya untuk memperoleh tambahan modal melalui sumber eksternal berupa investasi asing. Penelitian terdahulu telah dilakukan untuk mengetahui efek dari kepemilikan asing terhadap pengambilan keputusan dan kinerja perusahaan. Namun, hasil penelitian-penelitian tersebut masih beragam dan membawa kebingungan bagi perusahaan dan negara dalam memutuskan strategi untuk mempromosikan investasi asing. Terdapat dua persoalan yang ditemukan dalam penelitian-penelitian terkait kepemilikan asing. Pertama, sebagian besar penelitian menilai kepemilikan asing sebagai jenis kepemilikan dan kurang memperhatikan jenis pemilik asing sesungguhnya. Kedua, beberapa penelitian menemukan bahwa karakteristik negara memoderasi hubungan antara kepemilikan asing dan pengambilan keputusan serta kinerja perusahaan, namun penelitian-penelitian tersebut hanya mempertimbangkan satu sisi karakteristik negara (asal investor atau lokasi perusahaan). Penelitian ini mengusulkan agar agenda riset masa depan dapat menggali pengaruh perbedaan tipe kepemilikan pemilik asing terhadap pengambilan keputusan, risiko, dan kinerja perusahaan serta bagaimana perbedaan karakteristik negara dapat memoderasi hubungan antara tipe pemilik asing dengan pengambilan keputusan, risiko, dan kinerja perusahaan.


Country characteristics; corporate financial decision making; foreign ownership


Alexakis, P. D., & Samantas, I. G. (2020). Foreign ownership and market power: The special case of European banks. Journal of Banking & Finance, 118, 105857.

Alquist, R., Berman, N., Mukherjee, R., & Tesar, L. L. (2019). Financial constraints, institutions, and foreign ownership. Journal of International Economics, 118, 63–83.

Balachandran, B., Khan, A., Mather, P., & Theobald, M. (2019). Insider ownership and dividend policy in an imputation tax environment. Journal of Corporate Finance, 54, 153–167.

Batten, J. A., & Vo, X. V. (2015). Foreign ownership in emerging stock markets. Journal of Multinational Financial Management, 32–33, 15–24.

Ben-Nasr, H. (2016). State and foreign ownership and the value of working capital management. Journal of Corporate Finance, 41, 217–240.

Boubakri, N., El Ghoul, S., Guedhami, O., & Hossain, M. (2020). Post-privatization state ownership and bank risk-taking: Cross-country evidence. Journal of Corporate Finance, 64, 101625.

Boubakri, N., Guedhami, O., & Saffar, W. (2016). Geographic location, foreign ownership, and cost of equity capital: Evidence from privatization. Journal of Corporate Finance, 38, 363–381.

Bürker, M., Franco, C., & Minerva, G. A. (2013). Foreign ownership, firm performance, and the geography of civic capital. Regional Science and Urban Economics, 43(6), 964–984.

Bykova, A., & Jardon, C. M. (2017). Lean against the wind: The moderation effect of foreign investments during the economic recession in Russia. Journal of Economics and Business, 93, 1–14.

Carney, M., Estrin, S., Liang, Z., & Shapiro, D. (2019). National institutional systems, foreign ownership and firm performance: The case of understudied countries. Journal of World Business, 54(4), 244–257.

Chauhan, Y., & Kumar, S. (2017). Does founder ownership affect foreign investments? Evidence from India. Emerging Markets Review, 32, 116–129.

Chen, J., King, T. H. D., & Wen, M. M. (2020). Non-executive ownership and private loan pricing. Journal of Corporate Finance, 64(February 2019), 101638.

Chen, R., El Ghoul, S., Guedhami, O., & Wang, H. (2017). Do state and foreign ownership affect investment efficiency? Evidence from privatizations. Journal of Corporate Finance, 42, 408–421.

Chiu, W.-C., & Wang, C.-W. (2019). Rollover risk and cost of bank debt: The role of family-control ownership. Pacific-Basin Finance Journal, 53, 362–378.

Cho, K. R., Huang, C. H., & Padmanabhan, P. (2014). Foreign ownership mode, executive compensation structure, and corporate governance: Has the literature missed an important link? Evidence from Taiwanese firms. International Business Review, 23(2), 371–380.

Claessens, S., Djankov, S., & Lang, L. H. P. (2000). The separation of ownership and control in East Asian Corporations. In Journal of Financial Economics (Vol. 58, Issues 1–2).

Dachs, B., & Peters, B. (2014). Innovation, employment growth, and foreign ownership of firms: A European perspective. Research Policy, 43(1), 214–232.

Do, T. K., Lai, T. N., & Tran, T. T. C. (2020). Foreign ownership and capital structure dynamics. Finance Research Letters, 36, 101337.

Eden, L., & Miller, S. R. (2004). Distance Matters: Liability of Foreignness, Institutional Distance and Ownership Strategy. Advances in International Management, 16(04), 187–221.

Elliott, R. J. R., & Zhou, Y. (2015). Co-location and Spatial Wage Spillovers in China: The Role of Foreign Ownership and Trade. World Development, 66, 629–644.

Erhemjamts, O., & Huang, K. (2019). Institutional ownership horizon, corporate social responsibility and shareholder value. Journal of Business Research, 105(May), 61–79.

Eugster, N., & Isakov, D. (2019). Founding family ownership, stock market returns, and agency problems. Journal of Banking and Finance, 107, 105600.

Fiala, T., & Havranek, T. (2017). The sources of contagion risk in a banking sector with foreign ownership. Economic Modelling, 60, 108–121.

Florackis, C., Kanas, A., Kostakis, A., & Sainani, S. (2020). Idiosyncratic risk, risk-taking incentives and the relation between managerial ownership and firm value. European Journal of Operational Research, 283(2), 748–766.

Fu, X., Kong, L., Tang, T., & Yan, X. (2020). Insider trading and shareholder investment horizons. Journal of Corporate Finance, 62(August 2019), 101508.

Garanina, T., & Aray, Y. (2020). Enhancing CSR disclosure through foreign ownership, foreign board members, and cross-listing: Does it work in Russian context? Emerging Markets Review, 100754.

Girma, S., Gong, Y., Görg, H., & Lancheros, S. (2015). Investment liberalisation, technology take-off and export markets entry: Does foreign ownership structure matter? J. Econ. Behav. Organ., 116, 254–269,

Gueorguiev, D., & Malesky, E. (2012). Foreign investment and bribery: A firm-level analysis of corruption in Vietnam. J. Asian Econ., 23(2), 111–129,

Håkanson, L., & Ambos, B. (2010). The antecedents of psychic distance. Journal of International Management, 16(3), 195–210.

Hanousek, J., Shamshur, A., & Tresl, J. (2019). Firm efficiency, foreign ownership and CEO gender in corrupt environments. Journal of Corporate Finance, 59(15), 344–360.

He, J. (Jack), Huang, J., & Zhao, S. (2019). Internalizing governance externalities: The role of institutional cross-ownership. Journal of Financial Economics, 134(2), 400–418.

He, W., Li, D., Shen, J., & Zhang, B. (2013). Large foreign ownership and stock price informativeness around the world. Journal of International Money and Finance, 36, 211–230.

Holland, K. (2019). Government investment in publicly traded firms. Journal of Corporate Finance, 56(January), 319–342.

Hutson, E., Laing, E., & Ye, M. (2019). Mutual fund ownership and foreign exchange risk in Chinese firms. Journal of International Financial Markets, Institutions and Money, 60(71801087), 169–192.

Hymer, S. H. (1960). The international operations of national firms, a study of direct foreign investment [Massachusetts Institute of Technology].

Jensen, M. C., & Meckling W. H. (1976), Theory of the firm: Managerial behavior, agency cost, and ownership structure. Journal of Financial Economics, 3, 305-360

Jeon, J. Q., Lee, C., & Moffett, C. M. (2011). Effects of foreign ownership on payout policy: Evidence from the Korean market. Journal of Financial Markets, 14(2), 344–375.

Jin, D., Wang, H., Wang, P., & Yin, D. (2016). Social trust and foreign ownership: Evidence from qualified foreign institutional investors in China. Journal of Financial Stability, 23, 1–14.

Kabir, M. N., Miah, M. D., Ali, S., & Sharma, P. (2020). Institutional and foreign ownership vis-à-vis default risk: Evidence from Japanese firms. International Review of Economics & Finance, 69, 469–493.

Koch, M., & Smolka, M. (2019). Foreign ownership and skill-biased technological change. Journal of International Economics, 118, 84–104.

Kolasa, M., Rubaszek, M., & Taglioni, D. (2010). Firms in the great global recession: The role of foreign ownership and financial dependence. Emerging Markets Review, 11(4), 341–357.

Kwon, H. U., & Park, J. (2018). R&D, foreign ownership, and corporate groups: Evidence from Japanese firms. Research Policy, 47(2), 428–439.

La Porta, R., Lopez-de-Silanes, F., & Shleifer, A. (1999). Corporate ownership around the world. Journal of Finance, 54(2), 471–517.

Lam, K. C. K., Sami, H., & Zhou, H. (2012). The role of cross-listing, foreign ownership and state ownership in dividend policy in an emerging market. China Journal of Accounting Research, 5(3), 199–216.

Lassoued, N., Sassi, H., & Ben Rejeb Attia, M. (2016). The impact of state and foreign ownership on banking risk: Evidence from the MENA countries. Research in International Business and Finance, 36, 167–178.

Lee, C. C., Hsieh, M. F., & Yang, S. J. (2016). The effects of foreign ownership on competition in the banking industry: The key role of financial reforms. Japan and the World Economy, 37–38, 27–46.

Lee, E. J., Chae, J., & Lee, Y. K. (2018). Family ownership and risk taking. Finance Research Letters, 25, 69–75.

Lee, J., & Chung, K. H. (2018). Foreign ownership and stock market liquidity. International Review of Economics & Finance, 54, 311–325.

Limpaphayom, P., Rogers, D. A., & Yanase, N. (2019). Bank equity ownership and corporate hedging: Evidence from Japan. Journal of Corporate Finance, 58(April), 765–783.

Lin, L., Mihov, A., Sanz, L., & Stoyanova, D. (2019). Property rights institutions, foreign investment, and the valuation of multinational firms. Journal of Financial Economics, 134(1), 214–235.

Lindemanis, M., Loze, A., & Pajuste, A. (2019). The effect of domestic to foreign ownership change on firm performance in Europe. International Review of Financial Analysis, April, 101341.

Luthans, F., & Doh, J. P. (2018). International Management: Culture, Strategy, Behavior (10th ed.). McGraw-Hill Education.

McGuinness, P. B., Vieito, J. P., & Wang, M. (2017). The role of board gender and foreign ownership in the CSR performance of Chinese listed firms. Journal of Corporate Finance, 42, 75–99.

Meng, Y., Clements, M. P., & Padgett, C. (2018). Independent directors, information costs and foreign ownership in Chinese companies. Journal of International Financial Markets, Institutions and Money, 53, 139–157.

Mishra, A. V. (2013). Foreign ownership in Australian firms. Research in International Business and Finance, 28(1), 1–18.

Moin, A., Guney, Y., & El Kalak, I. (2020). The effects of ownership structure, sub-optimal cash holdings and investment inefficiency on dividend policy: evidence from Indonesia. In Review of Quantitative Finance and Accounting (Vol. 55, Issue 3). Springer US.

Moskalev, S. A. (2010). Foreign ownership restrictions and cross-border markets for corporate control. Journal of Multinational Financial Management, 20(1), 48–70.

Murro, P., & Peruzzi, V. (2019). Family firms and access to credit. Is family ownership beneficial? Journal of Banking and Finance, 101, 173–187.

Naufa, A. M., Lantara, I. W. N., & Lau, W. Y. (2019). The impact of foreign ownership on return volatility, volume, and stock risks: Evidence from ASEAN countries. Economic Analysis and Policy, 64, 221–235.

Purkayastha, S., Veliyath, R., & George, R. (2019). The roles of family ownership and family management in the governance of agency conflicts. Journal of Business Research, 98(January), 50–64.

Rugman, A., & Verbeke, A. (2008). Internationalization theory and its impact on the field of international business. Research in Global Strategic Management, 14, 177–201.

Shubita, R., & Shubita, M. F. (2019). The impact of foreign ownership on corporate governance: Evidence from an emerging market. Investment Management and Financial Innovations, 16(2), 101–115.

Stein, J. C. (2003). Chapter 2 Agency, information and corporate investment. Handbook of the Economics of Finance, 1(SUPPL. PART A), 111–165.

Surdu, I., & Mellahi, K. (2016). Theoretical foundations of equity based foreign market entry decisions: A review of the literature and recommendations for future research. International Business Review, 25(5), 1169–1184.

Tang, R. W., & Buckley, P. J. (2020). Host country risk and foreign ownership strategy: Meta-analysis and theory on the moderating role of home country institutions. International Business Review, 29(4), 101666.

Țaran, A. (2019). Corporate ownership and capital structure: evidence from Romania. Eastern Journal of European Studies, 10(1), 149–166.

Teixeira, A. A. C., & Tavares-Lehmann, A. T. (2014). Human capital intensity in technology-based firms located in Portugal: Does foreign ownership matter? Research Policy, 43(4), 737–748.

Trąpczyński, P., Halaszovich, T. F., & Piaskowska, D. (2020). The role of perceived institutional distance in foreign ownership level decisions of new MNEs. Journal of Business Research, 108(December 2017), 435–449.

Tunay, K. B., & Yüksel, S. (2017). The relationship between corporate governance and foreign ownership of the banks in developing countries. Contaduría y Administración, 62(5), 1627–1642.

Vo, X. V. (2015). Foreign ownership and stock return volatility - Evidence from Vietnam. Journal of Multinational Financial Management, 30, 101–109.

Wang, H., Luo, T., Tian, G. G., & Yan, H. (2020). How does bank ownership affect firm investment? Evidence from China. Journal of Banking & Finance, 113, 105741.

Wang, J., & Wang, X. (2015). Benefits of foreign ownership: Evidence from foreign direct investment in China. Journal of International Economics, 97(2), 325–338.

Wei, K. C. J., & Zhang, Y. (2008). Ownership structure, cash flow, and capital investment: Evidence from East Asian economies before the financial crisis. Journal of Corporate Finance, 14(2), 118–132.

Xie, F., Anderson, H. D., Chi, J., & Liao, J. (2019). Does residual state ownership increase stock return volatility? Evidence from china’s secondary privatization. Journal of Banking and Finance, 100, 234–251.

Yi, J., Teng, D., & Meng, S. (2018). Foreign ownership and bribery: Agency and institutional perspectives. International Business Review, 27(1), 34–45.

Yoshikawa, T., Rasheed, A. A., & Del Brio, E. B. (2010). The impact of firm strategy and foreign ownership on executive bonus compensation in Japanese firms. Journal of Business Research, 63(11), 1254–1260.

Zaheer, S. (1995). Overcoming the liability of foreignness. Academy of Management Journal, 38(2), 341–363.

Zhu, J. J. (John), Tse, C. H., & Li, X. (2019). Unfolding China’s state-owned corporate empires and mitigating agency hazards: Effects of foreign investments and innovativeness. Journal of World Business, 54(3), 191–212.


Jurnal Akuntansi dan Bisnis (JAB)
ISSN 1412-0852 (print), 2580-5444 (online)
Published by Accounting Study Program, Faculty of Economics and Business, Universitas Sebelas Maret, Indonesia

Creative Commons License
JAB on is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License

Visitor Statistic