Does institutional ownership affect firms' international investments? empirical evidence from India
Journal of Strategy and Management
ISSN: 1755-425X
Article publication date: 5 September 2020
Issue publication date: 25 January 2021
Abstract
Purpose
The preference of firm internationalization is shaped by different groups of owners and the institutional environment in which the firm operates. Past studies have largely ignored the heterogeneity among the controlling groups in influencing the internationalization decision in emerging economy firms.
Design/methodology/approach
In this study, the authors draw understanding from behavioral risk perspective and institutional theory to inspect the risk perceptions and propensities of various ownership groups such as lending institutions, domestic mutual funds and foreign institutional investors (FIIs). Empirical analysis was conducted from a sample of 2695 unique BSE-listed nonfinancial Indian firms during 2005−2019 period using Tobit panel regression analysis.
Findings
The findings reveal that firms' international investments are impacted differently by ownership share of different types of institutional investors after controlling for firm-level resources and capabilities. While lending institutions and FIIs are supportive of foreign investments by firms, domestic mutual funds are not supportive of this strategic decision on foreign investment.
Research limitations/implications
Further, our results show that family ownership, measured in terms of family shareholding, negatively moderates the lending institutions toward internationalization and does not impact the FIIs and mutual fund investor's decision regarding the foreign investments.
Originality/value
To the best of the author's knowledge, the current paper is the first to address the risk perceptions of various ownership groups on firm's international outlook in an emerging economy context with the latest data. This practical perspective helps the organizations in managing the ownership holdings.
Keywords
Citation
R L, M., Mishra, A.K. and Sinha, A.K. (2021), "Does institutional ownership affect firms' international investments? empirical evidence from India", Journal of Strategy and Management, Vol. 14 No. 1, pp. 50-63. https://doi.org/10.1108/JSMA-12-2019-0210
Publisher
:Emerald Publishing Limited
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