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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. 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.
    2. 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.
    3. 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.

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