Foreign equity ownership, corporate governance and financial performance

The increasing importance of the Foreign Direct Investment (FDI) is one of the most features of the world globalization. FDI is one of the key ways of economic development for emerging countries. It provides funding and expertise to help companies from the emerging markets to increase the international trading. The present research is conducted to assess the impact of foreign ownership, aiming to determine if foreign ownership improves corporate governance, firm performance and competitiveness and if foreign-owned entities over-perform domestic-owned companies. The empirical literature reveals mixed evidence. An increase in FDI has a positive effect on economic growth rates in financially developed countries but foreign ownership has either a negative or a small effect on firm performance in some emerging countries, like Croatia and the Taiwan. The main findings of the research support the view of a positive connection between FDI and firm performance. This suggests that FDI should be encouraged by policies regarding foreign ownership to enhance firm productivity and competitiveness in emerging markets.