New evidence from acquisition decisions suggests that antitakeover provisions (ATPs) may increase firm value when internal corporate governance is sufficiently strong. We document that, in Germany, firms with stronger ATPs, and particularly supermajority provisions, are better acquirers. Managers of high-ATP firms create value in acquisitions by making governance-improving deals. They are more likely to engage in acquisitions that reduce their own entrenchment level and less likely to invest in declining industries. The empirical evidence is consistent with a short-termist interpretation. Takeover threats can induce myopic investment decisions, which ATPs can mitigate. They lead managers to engage more often in value-creating long-term and innovative investing, and increase a firm's sensitivity to investment opportunities. Our findings contribute to a growing literature challenging conventional wisdom that the agency-increasing effect of ATPs empirically dominates the myopia-eliminating effect, suggesting that a more contextual view of the value implications of ATPs is necessary.
{"title":"Antitakeover Provisions and Firm Value: New Evidence from the M&A Market","authors":"W. Drobetz, Paul P. Momtaz","doi":"10.2139/ssrn.3315730","DOIUrl":"https://doi.org/10.2139/ssrn.3315730","url":null,"abstract":"New evidence from acquisition decisions suggests that antitakeover provisions (ATPs) may increase firm value when internal corporate governance is sufficiently strong. We document that, in Germany, firms with stronger ATPs, and particularly supermajority provisions, are better acquirers. Managers of high-ATP firms create value in acquisitions by making governance-improving deals. They are more likely to engage in acquisitions that reduce their own entrenchment level and less likely to invest in declining industries. The empirical evidence is consistent with a short-termist interpretation. Takeover threats can induce myopic investment decisions, which ATPs can mitigate. They lead managers to engage more often in value-creating long-term and innovative investing, and increase a firm's sensitivity to investment opportunities. Our findings contribute to a growing literature challenging conventional wisdom that the agency-increasing effect of ATPs empirically dominates the myopia-eliminating effect, suggesting that a more contextual view of the value implications of ATPs is necessary.","PeriodicalId":417524,"journal":{"name":"FEN: Other International Corporate Finance (Topic)","volume":"173 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-02-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114906855","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Exploiting the staggered adoption of country-level takeover laws that increased takeover threats, this paper examines whether the resulting increase in CEOs’ job security concerns leads to greater earnings management. Using a difference-in-difference design, I find that the enactment of laws designed to promote takeover activity is associated with greater earnings management activities (abnormally high accruals, target beating, and poor accruals quality). Furthermore, these activities contribute to increased opacity, as liquidity declines significantly (increased bid-ask spread, percentage of zero-return days, and price impact of trades) following takeover regulation. Impact on earnings management is most pronounced for managers facing the greatest risk of termination at the time of takeover law implementation – those who had been leading firms with poor performance, displaying higher inherent turnover risk, working in a merger intense industry, or working in a country-industry with heavy product market competition. However, strong institutions that can limit CEOs’ ability to manipulate accounting information mitigate the earnings management effects of takeover laws. Overall, my results suggest that reforms aimed at enhancing the monitoring role of governance have unintended consequences because these reforms increase CEOs’ job security concerns and thereby lead to greater earnings management and a more opaque information environment.
{"title":"Takeover Threats, Job Security Concerns, and Earnings Management","authors":"Edward Sul","doi":"10.2139/ssrn.3034948","DOIUrl":"https://doi.org/10.2139/ssrn.3034948","url":null,"abstract":"Exploiting the staggered adoption of country-level takeover laws that increased takeover threats, this paper examines whether the resulting increase in CEOs’ job security concerns leads to greater earnings management. Using a difference-in-difference design, I find that the enactment of laws designed to promote takeover activity is associated with greater earnings management activities (abnormally high accruals, target beating, and poor accruals quality). Furthermore, these activities contribute to increased opacity, as liquidity declines significantly (increased bid-ask spread, percentage of zero-return days, and price impact of trades) following takeover regulation. Impact on earnings management is most pronounced for managers facing the greatest risk of termination at the time of takeover law implementation – those who had been leading firms with poor performance, displaying higher inherent turnover risk, working in a merger intense industry, or working in a country-industry with heavy product market competition. However, strong institutions that can limit CEOs’ ability to manipulate accounting information mitigate the earnings management effects of takeover laws. Overall, my results suggest that reforms aimed at enhancing the monitoring role of governance have unintended consequences because these reforms increase CEOs’ job security concerns and thereby lead to greater earnings management and a more opaque information environment.","PeriodicalId":417524,"journal":{"name":"FEN: Other International Corporate Finance (Topic)","volume":"43 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-02-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132285824","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In 2009, Japan began to exempt dividends paid by Japanese-owned foreign sub- sidiaries to their parent firms from home-country taxation. This tax reform switched Japan's corporate tax system to a territorial tax system that exempts foreign income from home-country taxation. In this paper, I examine the impact of the territorial tax reform on the profit-shifting behavior of Japanese multinationals. I analyze the change in the sensitivity of the reported profits of Japanese-owned foreign subsidiaries to host countries' corporate income tax rates after the tax reform, using US-owned foreign subsidiaries as a comparison group. I find that, on average, the profits of US-owned foreign subsidiaries are more sensitive to host countries' tax rates than are those of Japanese-owned foreign subsidiaries over the whole study period from 2004 to 2016 and over the subperiod from 2004 to 2007, when both countries used the worldwide tax system. However, the sensitivity of the pre-tax profits of Japanese-owned foreign subsidiaries, particularly large subsidiaries, to host countries' corporate tax rates sig- nificantly increased in response to the announcement of the territorial tax regime in 2008, relative to that of the US-owned foreign subsidiaries. This suggests that the introduction of the territorial tax system facilitated profit shifting by Japanese multi- nationals.
{"title":"Territorial Tax Reform and Profit Shifting by US and Japanese Multinationals","authors":"M. Hasegawa","doi":"10.2139/ssrn.3498964","DOIUrl":"https://doi.org/10.2139/ssrn.3498964","url":null,"abstract":"In 2009, Japan began to exempt dividends paid by Japanese-owned foreign sub- sidiaries to their parent firms from home-country taxation. This tax reform switched Japan's corporate tax system to a territorial tax system that exempts foreign income from home-country taxation. In this paper, I examine the impact of the territorial tax reform on the profit-shifting behavior of Japanese multinationals. I analyze the change in the sensitivity of the reported profits of Japanese-owned foreign subsidiaries to host countries' corporate income tax rates after the tax reform, using US-owned foreign subsidiaries as a comparison group. I find that, on average, the profits of US-owned foreign subsidiaries are more sensitive to host countries' tax rates than are those of Japanese-owned foreign subsidiaries over the whole study period from 2004 to 2016 and over the subperiod from 2004 to 2007, when both countries used the worldwide tax system. However, the sensitivity of the pre-tax profits of Japanese-owned foreign subsidiaries, particularly large subsidiaries, to host countries' corporate tax rates sig- nificantly increased in response to the announcement of the territorial tax regime in 2008, relative to that of the US-owned foreign subsidiaries. This suggests that the introduction of the territorial tax system facilitated profit shifting by Japanese multi- nationals.","PeriodicalId":417524,"journal":{"name":"FEN: Other International Corporate Finance (Topic)","volume":"164 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-12-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128227389","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper examines the impact of cross-country variation in shareholders' and debt holders' rights on post-IPO performance and survival of newly listed stocks across the globe. Using a sample of 10,490 initial public offerings (IPOs) in 40 countries between 2000 and 2013, we find that post-IPO performance and survival is better in countries with stronger shareholder protection, but the impact of creditor protection is negative i.e. stronger creditor protection leads to poor post-IPO performance and survival. This effect is driven by rules requiring creditors’ consent for company reorganization and the mandatory replacement of incumbent managers. Reputable IPO advisors exacerbate the positive impact of shareholder rights and the negative impact of creditor rights.
{"title":"The Impact of Shareholders and Creditors Rights on IPO Performance: An International Study","authors":"Susanne Espenlaub, Abhinav Goyal, A. Mohamed","doi":"10.2139/ssrn.3222133","DOIUrl":"https://doi.org/10.2139/ssrn.3222133","url":null,"abstract":"This paper examines the impact of cross-country variation in shareholders' and debt holders' rights on post-IPO performance and survival of newly listed stocks across the globe. Using a sample of 10,490 initial public offerings (IPOs) in 40 countries between 2000 and 2013, we find that post-IPO performance and survival is better in countries with stronger shareholder protection, but the impact of creditor protection is negative i.e. stronger creditor protection leads to poor post-IPO performance and survival. This effect is driven by rules requiring creditors’ consent for company reorganization and the mandatory replacement of incumbent managers. Reputable IPO advisors exacerbate the positive impact of shareholder rights and the negative impact of creditor rights.","PeriodicalId":417524,"journal":{"name":"FEN: Other International Corporate Finance (Topic)","volume":"114 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-11-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124043352","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This study examines data from 35 countries and 24 industries to understand the relationship between gender diversity and firm performance. Previous studies report conflicting evidence: some find that gender-diverse firms experience more positive performance and others find the opposite. However, most research to date has focused on a single country or industry and has not accounted for possible variation across social contexts. This paper advances an institutional framework and predicts that gender diversity’s relationship with performance depends on both its normative and regulatory acceptance in the broader institutional environment. Using a unique longitudinal sample of 1,069 leading public firms around the world, I find that the relationship between gender diversity and firm performance varies significantly across countries and industries due to differences in institutional context. The more gender diversity has been normatively accepted in a country or industry, the more gender-diverse firms experience positive market valuation and increased revenue. These findings underscore the importance of the broader social context when considering the relationship between gender diversity and firm performance.
{"title":"An Institutional Approach to Gender Diversity and Firm Performance","authors":"Letian Zhang","doi":"10.2139/ssrn.3461294","DOIUrl":"https://doi.org/10.2139/ssrn.3461294","url":null,"abstract":"This study examines data from 35 countries and 24 industries to understand the relationship between gender diversity and firm performance. Previous studies report conflicting evidence: some find that gender-diverse firms experience more positive performance and others find the opposite. However, most research to date has focused on a single country or industry and has not accounted for possible variation across social contexts. This paper advances an institutional framework and predicts that gender diversity’s relationship with performance depends on both its normative and regulatory acceptance in the broader institutional environment. Using a unique longitudinal sample of 1,069 leading public firms around the world, I find that the relationship between gender diversity and firm performance varies significantly across countries and industries due to differences in institutional context. The more gender diversity has been normatively accepted in a country or industry, the more gender-diverse firms experience positive market valuation and increased revenue. These findings underscore the importance of the broader social context when considering the relationship between gender diversity and firm performance.","PeriodicalId":417524,"journal":{"name":"FEN: Other International Corporate Finance (Topic)","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-09-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130575003","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper provides new evidence on how interest rates are linked to corporate cash policy in the presence of financial frictions. Using both time-series and firm-level data for US public and private manufacturing firms, we find a negative correlation between cash holdings and the interest rates for large/unconstrained firms. We find no evidence of such a relation for small/constrained firms. Our results can help reconcile the contradictory findings of previous studies and suggest that financial constraints play an important role in the adjustment of cash to changes in interest rates. We introduce a simple model in which firms differ in their cost function of external finance, where the constrained firms' highly curved cost function drives a steeper cash demand, leading to their lower cash-interest rate sensitivity.
{"title":"Interest Rates, Financial Constraints, and Dynamics of Corporate Cash Holdings","authors":"R. Eskandari, Morteza Zamanian","doi":"10.2139/ssrn.3466188","DOIUrl":"https://doi.org/10.2139/ssrn.3466188","url":null,"abstract":"This paper provides new evidence on how interest rates are linked to corporate cash policy in the presence of financial frictions. Using both time-series and firm-level data for US public and private manufacturing firms, we find a negative correlation between cash holdings and the interest rates for large/unconstrained firms. We find no evidence of such a relation for small/constrained firms. Our results can help reconcile the contradictory findings of previous studies and suggest that financial constraints play an important role in the adjustment of cash to changes in interest rates. We introduce a simple model in which firms differ in their cost function of external finance, where the constrained firms' highly curved cost function drives a steeper cash demand, leading to their lower cash-interest rate sensitivity.","PeriodicalId":417524,"journal":{"name":"FEN: Other International Corporate Finance (Topic)","volume":"59 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-08-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122656377","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
An implied volatility index reflects the market expectations for the future volatility of the underlying equity index. This study tests and documents the information content, regarding both the realized volatility and the returns of the underlying equity index, of all publicly available implied volatility indices across the world. The empirical findings suggest that implied volatility indices include information about future volatility beyond that contained in past volatility. In addition, we show that there is a statistically significant negative and asymmetric contemporaneous relationship between implied volatility changes and the corresponding underlying equity index returns. Furthermore, this study contributes to the international equity market integration studies by investigating the linkages among major stock exchanges; the basis of the integration analysis is the implied volatility of each market, as proxied by the corresponding implied volatility index and the findings suggest that there is significant integration with respect to market participants’ expectations about future uncertainty.
{"title":"Implied Volatility Indices – A Review","authors":"C. Siriopoulos, Athanasios P. Fassas","doi":"10.2139/ssrn.1421202","DOIUrl":"https://doi.org/10.2139/ssrn.1421202","url":null,"abstract":"An implied volatility index reflects the market expectations for the future volatility of the underlying equity index. This study tests and documents the information content, regarding both the realized volatility and the returns of the underlying equity index, of all publicly available implied volatility indices across the world. The empirical findings suggest that implied volatility indices include information about future volatility beyond that contained in past volatility. In addition, we show that there is a statistically significant negative and asymmetric contemporaneous relationship between implied volatility changes and the corresponding underlying equity index returns. Furthermore, this study contributes to the international equity market integration studies by investigating the linkages among major stock exchanges; the basis of the integration analysis is the implied volatility of each market, as proxied by the corresponding implied volatility index and the findings suggest that there is significant integration with respect to market participants’ expectations about future uncertainty.","PeriodicalId":417524,"journal":{"name":"FEN: Other International Corporate Finance (Topic)","volume":"2 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-06-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130864918","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Objective: To verify whether firms that operate in several different business sectors are more tax aggressive in comparison to firms that operate in a single or a few segments. Method: The study analyzes a sample of firms listed in the Brazilian stock exchange B3 in the period from 2010 to 2017. To verify the existence of a relationship between diversification and tax aggressiveness, a data panel regression model with fixed effect of company and year was used and additionally the logit model. To measure tax aggressiveness, it was used ETR (effective rate of taxation) and ETR long (long-run effective tax rates). Originality/relevance: This type of research is unprecedented in Brazil, being a point not yet explored in the literature, in view of its peculiarities of a developing country. Relevant to define the effect of diversification on tax aggressiveness. Results: It was observed that the more companies are diversified, the lower the probability of having low tax aggressiveness, or that more diversified companies are more likely to be more aggressive, compared to companies with only one segment. Therefore, the results indicate that among companies with segments, the more segments, the more aggressive the company. Theoretical/Methodological contributions: A better understanding of the phenomenon of tax aggressiveness, causes and determinants, having implications for financial statement users, in particular tax regulators.
{"title":"The Effect of Corporate Diversification on Tax Aggressiveness in Brazilian Companies","authors":"Antonio Lopo Martinez, A. Rodrigues","doi":"10.2139/ssrn.3386433","DOIUrl":"https://doi.org/10.2139/ssrn.3386433","url":null,"abstract":"Objective: To verify whether firms that operate in several different business sectors are more tax aggressive in comparison to firms that operate in a single or a few segments. Method: The study analyzes a sample of firms listed in the Brazilian stock exchange B3 in the period from 2010 to 2017. To verify the existence of a relationship between diversification and tax aggressiveness, a data panel regression model with fixed effect of company and year was used and additionally the logit model. To measure tax aggressiveness, it was used ETR (effective rate of taxation) and ETR long (long-run effective tax rates). Originality/relevance: This type of research is unprecedented in Brazil, being a point not yet explored in the literature, in view of its peculiarities of a developing country. Relevant to define the effect of diversification on tax aggressiveness. Results: It was observed that the more companies are diversified, the lower the probability of having low tax aggressiveness, or that more diversified companies are more likely to be more aggressive, compared to companies with only one segment. Therefore, the results indicate that among companies with segments, the more segments, the more aggressive the company. Theoretical/Methodological contributions: A better understanding of the phenomenon of tax aggressiveness, causes and determinants, having implications for financial statement users, in particular tax regulators.","PeriodicalId":417524,"journal":{"name":"FEN: Other International Corporate Finance (Topic)","volume":"303 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-05-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132818389","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper appraises the relative impact of creditor information and creditor rights on corporate bond issues. I employ a large panel of 3,969 bond issuers from 54 countries, between 2013 and 2017. I constantly find that an increase in creditor information is associated with an increase in the amounts of bonds issued. On the opposite, I document a very limited impact of creditor protection. Considering both simultaneously, only the positive impact of information persists, supporting a primal role of information on bond markets. I show that the positive effect of information originates from both the supply- and demand-side of the bond market, with lower coupon rates, less restrictive covenants, longer maturities and more frequent issues. I further document how creditor information alleviates issues stemming from firm’s opacity and firm’s risk. Results are robust to different specifications and robustness tests.
{"title":"Legal Environment and Corporate Bonds: The Primal Role of Information","authors":"P. Klein","doi":"10.2139/ssrn.3305131","DOIUrl":"https://doi.org/10.2139/ssrn.3305131","url":null,"abstract":"This paper appraises the relative impact of creditor information and creditor rights on corporate bond issues. I employ a large panel of 3,969 bond issuers from 54 countries, between 2013 and 2017. I constantly find that an increase in creditor information is associated with an increase in the amounts of bonds issued. On the opposite, I document a very limited impact of creditor protection. Considering both simultaneously, only the positive impact of information persists, supporting a primal role of information on bond markets. I show that the positive effect of information originates from both the supply- and demand-side of the bond market, with lower coupon rates, less restrictive covenants, longer maturities and more frequent issues. I further document how creditor information alleviates issues stemming from firm’s opacity and firm’s risk. Results are robust to different specifications and robustness tests.","PeriodicalId":417524,"journal":{"name":"FEN: Other International Corporate Finance (Topic)","volume":"4 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-04-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127895078","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2019-03-20DOI: 10.35611/jkt.2019.23.2.88
S. Kim, Seungrae Lee
Purpose - This paper examines the effects of host country’s non-economic factors on foreign affiliate’s financial and operational performance.
Design/Methodology - Using Korean-owned foreign affiliate-level data, we employ various measures that represent host country’s non-economic factors and examine their effects on foreign affiliate’s performance. We further investigate the effects of local top managers and local middle managers on the impact of country’s non-economic factors on foreign affiliate’s performance.
Findings - We find that local top managers are effective in increasing foreign affiliate’s financial performance by dealing with institutional and cultural factors, particularly in high-income countries, while local middle managers are effective in increasing affiliate’s operational performance by responding to the changes in doing business factors, particularly in low-income countries.
Originality/value - Considering that most of previous FDI studies focus on examining host country’s economic factors on firm’s FDI decision, our findings suggest that country’s non-economic factors are strongly associated with actual business performance of foreign affiliates.
{"title":"Host Country’s Non-Economic Factors, Local Managers, and Foreign Affiliate Performance","authors":"S. Kim, Seungrae Lee","doi":"10.35611/jkt.2019.23.2.88","DOIUrl":"https://doi.org/10.35611/jkt.2019.23.2.88","url":null,"abstract":"Purpose - This paper examines the effects of host country’s non-economic factors on foreign affiliate’s financial and operational performance. <br><br>Design/Methodology - Using Korean-owned foreign affiliate-level data, we employ various measures that represent host country’s non-economic factors and examine their effects on foreign affiliate’s performance. We further investigate the effects of local top managers and local middle managers on the impact of country’s non-economic factors on foreign affiliate’s performance. <br><br>Findings - We find that local top managers are effective in increasing foreign affiliate’s financial performance by dealing with institutional and cultural factors, particularly in high-income countries, while local middle managers are effective in increasing affiliate’s operational performance by responding to the changes in doing business factors, particularly in low-income countries. <br><br>Originality/value - Considering that most of previous FDI studies focus on examining host country’s economic factors on firm’s FDI decision, our findings suggest that country’s non-economic factors are strongly associated with actual business performance of foreign affiliates.","PeriodicalId":417524,"journal":{"name":"FEN: Other International Corporate Finance (Topic)","volume":"27 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-03-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132432745","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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