Exploring non-linear relationship between foreign ownership and firm performance

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Abstract

This study aims to examine the impact of foreign ownership on the performance of Indian firms. Additionally, it also analyses the non-linear relationship of foreign ownership with firm performance. A panel data approach has been used in this study. Specifically, the fixed effect estimation technique is used to examine the relationship between foreign ownership and firm performance during the period 2009–2010 to 2018–2019. The foreign institutional shareholders and the foreign corporate bodies hold more shareholding than the foreign individual investors. The authors find that foreign institutional investors and foreign corporate bodies bear a positive relationship with the performance of Indian firms. Additionally, foreign ownership shows a non-linear relationship with firm performance. The results are robust across the various proxies of firm performance, and sub-samples based on foreign ownership.

Keywords: Firm Performance, Foreign Ownership, Foreign Institutional Investor, Foreign Corporate Bodies, Foreign Individual Investor

Authors’ individual contribution: Conceptualization — N.G., T.A., and B.J.; Methodology — N.G.; Formal Analysis — N.G. and B.J.; Investigation — N.G.; Writing — Original Draft — N.G., T.A., and B.J.; Writing — Reviewing & Editing — T.A. and B.J.; Supervision — N.G.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

Acknowledgements: The authors are thankful to Mr. Harsh Verma, Mr. Vinay Kumar Namdeo, and Miss Harshita Raje Singh for their valuable contribution in the collection and tabulation of data for this study.

JEL Classification: G230, G320, M160

Received: 01.02.2021
Accepted: 26.04.2021
Published online: 28.04.2021

How to cite this paper: Gupta, N., Agarwal, T., & Jagwani, B. (2021). Exploring non-linear relationship between foreign ownership and firm performance [Special issue]. Corporate Ownership & Control, 18(3), 257–274. https://doi.org/10.22495/cocv18i3siart3