Ownership-Control Disparity and Foreign Investors' Ownership: Evidence from the Korean Stock Market

Relation between foreign ownership and firm value – Fixed-effect panel threshold regression analysis

“…Large shareholdings are found to be more or less long-term as well as stable investments (Stiglitz, 1999). The presence of large domestic shareholders in emerging markets has led to ineffective corporate governance as found by Gibson (2003), and concentrated domestic shareholdings will augment foreign shareholdings whereas dispersed domestic shareholdings will decrease foreign shareholding as found by Choi et al (2014).…”

“…Also, studies suggest that foreign institutional investment increases firm performance probably due to foreign institutional investor's ability to choose stocks that diversify their global portfolios and provide high valuations (Huang and Shiu, 2009;Khanna, 2002). Many past studies suggest that the bigger the firm size, the more will be the foreign investment (Mukaria et al, 2020;Choi et al, 2014;Bokpin and Isshaq, 2009;Ko et al, 2007;Mangena and Tauringana, 2007;Liljeblom and L€ oflund, 2005;Tong and Ning, 2004;Anderson et al, 2001;O'Brien and Bhushan, 1990), and lower the long-term leverage, the more will be the foreign Fixed-effect panel threshold regression investment (Gurunlu and Gursoy, 2010;Huang and Song, 2006;Anderson et al, 2001;Kang and Slutz, 1997;Rajan and Zingales, 1995;Titman and Wessels, 1988;Jensen and Meckling, 1976), barring only a few exceptions (Wahab et al, 2008;Liljeblom and L€ oflund, 2005). Likewise, foreign investors prefer stock with large capitalization (Bokpin and Isshaq, 2009;Mangena and Tauringana, 2007;Ko et al, 2007;Liljeblom and L€ oflund, 2005;Kang and Slutz, 1997) and low book to market ratio (Ko et al, 2007) as suggested by many previous studies.…”

“…Likewise, foreign investors prefer stock with large capitalization (Bokpin and Isshaq, 2009;Mangena and Tauringana, 2007;Ko et al, 2007;Liljeblom and L€ oflund, 2005;Kang and Slutz, 1997) and low book to market ratio (Ko et al, 2007) as suggested by many previous studies. This is based on the idea that all investments are for profits, so more the profitability of firms, more will be the foreign investments (Choi et al, 2014;Fu and Wu, 2013;Mangena and Tauringana, 2007;Liljeblom and L€ oflund, 2005;La Porta et al, 1998;Kang and Slutz, 1997). However, the relation between profitability of firms and foreign ownership is at times downward sloping wherein the profitability and growth of domestic firms can be enhanced by small initial foreign shareholdings, but a large share of foreign capital would reduce firms' profitability as revealed by Fu and Wu (2013).…”

Internationalization of Family Business Groups: Content Analysis of the Literature and a Synthesis Model

“…Foreign equity ownership is generally higher for FBG firms than stand-alone firms (Baek et al, 2004;Choi et al, 2013). However, excessive ownership-control disparity has a negative influence on the FBGs' ability to attract both foreign portfolio investment (Kim et al, 2011) and being chosen as a JV partner (Choi et al, 2014;Luo et al, 2009). It emerges as a problem particularly in attracting foreign industrial, vis-a-vis foreign financial, investors (Choi et al, 2014) and investors from countries with low ownership-control disparity (Luo et al, 2009).…”

“…However, excessive ownership-control disparity has a negative influence on the FBGs' ability to attract both foreign portfolio investment (Kim et al, 2011) and being chosen as a JV partner (Choi et al, 2014;Luo et al, 2009). It emerges as a problem particularly in attracting foreign industrial, vis-a-vis foreign financial, investors (Choi et al, 2014) and investors from countries with low ownership-control disparity (Luo et al, 2009). In emergence of different foreign equity configurations, articles in this category highlight the role of governance model in the foreign investor's home country, type of foreign investor, and governance structure of the domestic firm.…”