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

Abstract

To overcome this problem, in need of capital resources, firms and countries try to acquire additional capital externally through foreign investment. Previous research has examined 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 confuse 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 focuses less 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.