Foreign shareholding, corporate governance and firm performance: Evidence from Chinese companies

URI finance professor Dr. Georges Tsafack and his colleague Lin Guo from Suffolk University have collaborated on a new paper published in the Journal of Behavioral and Experimental Finance.

This paper, Foreign shareholding, corporate governance and firm performance: Evidence from Chinese companies, examines how a firm’s corporate governance characteristics and institutional environment affect the presence of large foreign shareholding, and how a firm’s foreign ownership influences its performance.

Through their research, Professor Tsafack and Professor Guo found that both firm-level governance characteristics and country-level institutional environment affect the presence and the extent of large foreign shareholding. Further, an inverted U-shaped relation between a firm’s foreign ownership and its return on assets, return on equity and Tobin’s q was discovered.

This relationship signified that optimal foreign ownership increases when changes in institutional environment reduce the opportunity for controlling shareholders to extract private benefits.