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Foreign Investors as Change Agents: The Swedish Firm Experience

Author

Listed:
  • Fogel, Kathy S.

    () (University of Arkansas)

  • Lee, Kevin K.

    () (California State University)

  • Lee, Wayne Y.

    () (University of Arkansas)

  • Palmberg, Johanna

    () (Entrepreneurship Forum, CESIS, KTH)

Abstract

Institutional theory suggests that informal institutions effectively constrain human behavior. Culturally embedded norms and values align corporate governance with socially acceptable outcomes. We argue that active foreign investors can act as agents of change in corporate governance. Investigating changes in ownership and control of Swedish firms, we find that active foreign investors’ participation in conjunction with a reduction of control by the largest domestic shareholder, improves firm performance through more efficient capital utilization and labor productivity. Firms move away from a Swedish stakeholder orientation toward an Anglo-American shareholder wealth maximization focus.

Suggested Citation

  • Fogel, Kathy S. & Lee, Kevin K. & Lee, Wayne Y. & Palmberg, Johanna, 2013. "Foreign Investors as Change Agents: The Swedish Firm Experience," Working Paper Series in Economics and Institutions of Innovation 311, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
  • Handle: RePEc:hhs:cesisp:0311
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    File URL: https://static.sys.kth.se/itm/wp/cesis/cesiswp311.pdf
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    References listed on IDEAS

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    Cited by:

    1. García-Meca, Emma & García-Sánchez, Isabel-María & Martínez-Ferrero, Jennifer, 2015. "Board diversity and its effects on bank performance: An international analysis," Journal of Banking & Finance, Elsevier, vol. 53(C), pages 202-214.

    More about this item

    Keywords

    Foreign Direct Investors; Informal Institution; Business Culture;

    JEL classification:

    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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