TY  - JOUR
AU  - Gurbuz, Ali Osman 
AU  - Aybars, Asli 
PY  - 2010
TI  - The Impact of Foreign Ownership on Firm Performance, Evidence from an Emerging Market: Turkey
JF  - American Journal of Economics and Business Administration
VL  - 2
IS  - 4
DO  - 10.3844/ajebasp.2010.350.359
UR  - https://thescipub.com/abstract/ajebasp.2010.350.359
AB  - Problem statement: The inflows of foreign direct investment are important sources of
finance for developing countries. Due to the increase in the amount of the international flows of capital
over the last three decades, the issue of the possible impact of foreign direct investment on the
performance of corporations and thus the economy has gained increased attention. The purpose of this
study is to explore how the financial performance of the companies listed on the Istanbul Stock
Exchange (ISE) is affected by foreign ownership. Approach: This study employed panel data analysis
on a sample of 205 non-financial listed companies covering the 3 year time period from 2005-2007.
After having examined previous empirical work, several firm and industry related variables are
included to eliminate the likely impact of other factors on corporate financial performance and to
accurately demonstrate whether there are any significant differences in the financial performance of the
firms due to foreign ownership. We also take into account the existence of a potential reverse
relationship and conduct causality tests between the measures of financial performance and
percentages of foreign ownership. Results: The results indicated that minority foreign-owned
companies (MIN) perform better than domestic ones (DOM) in terms of operating profitability. When
return on assets is employed as a performance measure, it is observed that MIN perform better than
both DOM and majority foreign-owned companies (MAJ). It is also found that MAJ perform worse
than DOM. The results of further analyzed, which employ yearly dummies for different ownership
structures, are also provided. Conclusion: The overall results of this study indicated that foreign
ownership improves firm financial performance in Turkey up to a certain level, beyond which
additional ownership by the foreigners does not add to firm profitability. As it is obvious that the
recent financial crisis will reduce the amount of international movement of capital, it is important to
analyze the case prior to the crisis to be better able to gauge the possible impact of the lack of these
inflows on companies in 2009 and onwards.