Corporate governance, resources, FDI commitment and firm performance

Ming‐Tien Tsai · Wen-Hui Tung

14 citations0/0 files storedChinese Management Studies

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Corporate Finance and Governance International Business and FDI Corporate Governance and Financial Management

Abstract

Purpose – This study aims to explore the effects of corporate governance structure and resources on foreign direct investment (FDI) commitment and firm performance. Design/methodology/approach – The data are collected from high-tech firms listed by the Taiwan Stock Exchange. All selected 137 firms have complete FDI and other required data during 2007-2009. The mean values of the variables during the three-year period were used for analysis. Findings – The results indicate that both chief executive officer (CEO) duality and government shareholding affect a firm’s FDI; and the higher the management shareholding ratio, the lower the return on equity. Moreover, a large ownership of substantial shareholders can enhance a firm’s performance; and higher institutional ownership can lead to higher firm performance. Research limitations/implications – This study analyses the limited data from 137 high-tech firms in Taiwan during the three-year period of 2007-2009. Further analyses of other industries, countries and time periods are needed to generalize the conclusions. Practical implications – A firm with CEO duality should increase the ratio of government holding to mitigate the influence of CEO on FDI decisions. When a firm’s performance is poor, the ratio of managerial holdings should be reduced; conversely, the firm could attract more holdings from domestic securities and funds to improve performance. Originality/value – This study provides guidelines for shareholders to analyze governance structure and formulate their investment strategies. Corporate policymakers may use these as the principles for designing a corporate governance structure that could engender optimal firm performance.

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References

1976Theory of the firm: Managerial behavior, agency costs and ownership structure 1984A resource‐based view of the firm 1988Management ownership and market valuation 1985The Structure of Corporate Ownership: Causes and Consequences 1969A General Equilibrium Approach To Monetary Theory 1983Agency Problems and Residual Claims 1990Additional evidence on equity ownership and corporate value 1983The market for corporate control

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