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The more the better? Foreign ownership and corporate performance in China

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  • David Greenaway
  • Alessandra Guariglia
  • Zhihong Yu

Abstract

We examine the relationship between the degree of foreign ownership and performance of recipient firms, using a panel of 21,582 Chinese firms over the period 2000-2005. We find that joint-ventures perform better than wholly foreign-owned and purely domestic firms. Although productivity and profitability initially rise with foreign ownership, they start declining once it reaches a certain point. This suggests that some domestic ownership is necessary to ensure optimal performance. We referred these findings to a model of a joint-venture, where strategic interactions between a foreign and a domestic owner's inputs may lead to an inverted U -shaped ownership-performance relationship.

Suggested Citation

  • David Greenaway & Alessandra Guariglia & Zhihong Yu, 2014. "The more the better? Foreign ownership and corporate performance in China," The European Journal of Finance, Taylor & Francis Journals, vol. 20(7-9), pages 681-702, September.
  • Handle: RePEc:taf:eurjfi:v:20:y:2014:i:7-9:p:681-702
    DOI: 10.1080/1351847X.2012.671785
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    12. Aleksandra Kordalska & Magdalena Olczyk, 2019. "What Fosters Firm-Level Labour Productivity In Eastern European And Central Asian Countries?," GUT FME Working Paper Series A 55, Faculty of Management and Economics, Gdansk University of Technology.
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    15. Iuliana Oana MIHAI, 2011. "Foreign Capital and Firm Performance - Study Case on Companies Listed on BSE," Risk in Contemporary Economy, "Dunarea de Jos" University of Galati, Faculty of Economics and Business Administration, pages 400-405.

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