Foreign Ownership and Performance of Listed Firms: Evidence from an Emerging Economy

Motivated by the relationship between foreign ownership and firm-level performances in emerging countries, we select Vietnam’s listed market as the context for this empirical setting. We find that there is a significant inverted U shaped relationship between foreign ownership and firm performances. The non-monotonic relationship is consistent with corporate governance theory on the gains from monitoring effects by shareholders or the losses from expropriations when their ownership exceeds a certain large level. Furthermore, we find that foreign investors disfavor firms with high concentration of ownership that relates to image of weak corporate governance. Lastly, there are also evidences that foreign investors are likely to invest in firms with good financial performances, large size, low level of debts, in pharmaceutical industry, and listed in higher liquid stock exchange.