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Economic Openness and Institutional Embeddedness: Global Capital and Firm Performance in China's Stock Market *
Author(s) -
Wang Junmin,
Zhang Yanlong,
Guthrie Doug
Publication year - 2018
Publication title -
social science quarterly
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.482
H-Index - 90
eISSN - 1540-6237
pISSN - 0038-4941
DOI - 10.1111/ssqu.12413
Subject(s) - openness to experience , profitability index , business , state ownership , foreign ownership , china , share capital , embeddedness , market share , globalization , emerging markets , monetary economics , economics , market economy , foreign direct investment , corporate governance , finance , macroeconomics , psychology , social psychology , sociology , political science , anthropology , law , shareholder
Objectives This study advances the theoretical perspective in studying economic globalization that emphasizes the moderating role of local institutions on the potential benefits brought by foreign investments on host nations. Methods We use mixed‐effects regression models to analyze a longitudinal data set of China's publicly listed firms between 1996 and 2012, examining how foreign share affects firm performance independently and how domestic ownerships moderate foreign share's effects on firm profitability. Results Our results show partial evidence for the positive role of foreign ownership on firm performance. We find that private share positively moderates the effects of foreign share on firm profitability whereas state share plays a negative moderating role. As a progressive state ownership, state institutional share appears to cooperate with foreign share more effectively than state share. Conclusion We suggest that the global‐local partnership plays a critical role in assessing the consequences of foreign capital on local firm outcomes.