On the Treatment of Finance-Specific Factors Within the OLI Paradigm

This article argues that the body of foreign direct investment (FDI) literature in general and the ownership, location, and internalization (OLI) paradigm in particular would be enriched if finance-specific factors are explicitly incorporated as drivers of FDI. We suggest that financial strategies involving factors such as debt/equity swaps or equity-listings in foreign equity markets affect the firm’s relative cost and availability of capital, and motivate a firm’s engagement in FDI. Large, research-intensive firms, predominantly resident in the US, UK, Japan or other liquid markets, have in the literature been identified as typical prototypes of MNEs undertaking FDI. These firms are assumed to have no restrictions as regards their ability to achieve a competitive cost and availability of capital, a focus that has made financial capabilities and resources less of an issue in FDI research. Our article mitigates this by emphasizing the relevance of finance-specific proactive strategies for FDI to occur. We generate eight testable hypotheses based on the recognition of finance-specific factors as active drivers of value creating FDI.FDI; Cost of capital; Financial strategies; OLI

The Impact of Foreign Board Membership on Firm Value

This study examines the effect of foreign (Anglo-American) board membership on corporate performance measured in terms of firm value (Tobin’s Q). On a basis of firms with headquarters in Norway or Sweden the study indicates a significantly higher value for firms that have outsider Anglo-American board member(s), after a variety of firm-specific and corporate governance related factors have been controlled for. We argue that this superior performance reflects the fact that these companies have successfully broken away from a partly segmented domestic capital market by “importing” an Anglo-American corporate governance system. Such an “import” signals a willingness on the part of the firm to expose itself to improved corporate governance and enhances its reputation in the financial market.Foreign Board Membership; Corporate Governance; Board Monitoring; Cross-Listing

The impact of international influence on microbanks’ performance: A global survey

Microbanks serve micro-enterprises and poor people with financial services. This study examines how various aspects of international influence affect microbanks’ financial and social performance. Grounded in agency theory and resource-based theory, we argue that there are multiple ways that the internationalization of microbanks might affect performance. Specifically, we argue that one can distinguish between four sources of such internationalization effects; international initiator, international directorship, international debt, and international affiliation/networks. This study utilizes data from 379 microbanks in 73 developing countries – assessed between 2001 and 2008. We find that the internationalization of microbanks to a large extend enhances social performance, but does not enhance financial performance

The influence of business groups on board composition in offshore financial multinational enterprises

Based on resource dependence theory we argue for an influence of business groups (BGs) on the board composition of constituent offshore financial multinational enterprises (FMNEs). Using a unique sample of 171 Caribbean FMNEs in an inter-island BG setting, we find BGs’ control in constituent firms to be indicative of the importance of the internal financing and intermediation within the group network. This control leads to a higher proportion of lawyers hired to the boards of directors in BG-constituent firms and supports the argument that lawyers provide skills in complex offshore regulatory frameworks that facilitate BGs’ optimal tax management. Furthermore, we observe that an increased adoption of shareholder rights governance by BG-constituent firms is associated with increased engagement with outside resource providers, increased potential conflicts of interest and hence a need for hiring more lawyers. Our interpretation is that offshore FMNEs have a need for more lawyers, whose legal skill is critical to the competitive advantage of FMNEs.publishedVersio

Effekten av lederlønnsreguleringer i Norge

Topplederlønningene i Norge har de siste årene økt mer enn lønnsnivået i samfunnet for øvrig. Lederlønningene i offentlige organisasjoner og statsbedrifter er lavere enn i privat sektor. Lederlønnsforskjellene i det offentlige er dessuten små, og lederlønnsutviklingen i analyseperioden har vært moderat. Lederlønningene i norskeide private bedrifter ligger 30-40 prosent høyere enn i offentlig virksomhet, mens lederlønningene i utenlandskeide privatbedrifter er nesten dobbelt så høye som i offentlig virksomhet. Lønnsforskjellene mellom lederne i norskeide og utenlandskeide selskaper er imidlertid langt større, mens lederlønningene i disse to bedriftsgruppene vokser noe mer enn i det offentlige. Det er i de børsnoterte selskapene at lederlønningene er høye og stiger mest. I 2008 var middelverdien til topplederlønningene i børsnoterte selskaper på 3,3 millioner kroner. Ledere av børsnoterte selskap tjente om lag tre ganger så mye som lederne av offentlig virksomhet i 2008. Foruten fastlønn inkluderer dette beløpet bonusutbetalinger, pensjonsfordeler, samt verdien av aksje- og opsjonsprogrammer. Fra 2004 til 2008 har den gjennomsnittlige godtgjørelse til toppledere i børsnoterte selskaper økt med 16 prosent per år, mens tilsvarende økning i industriarbeiderlønningene var under 5 prosent. I de syv børsselskap hvor staten har store eierandeler var godtgjørelsen til toppleder om lag 6 millioner kroner, og den årlige veksten var på 10 prosent

Corporate governance and company performance across Sub-Saharan African countries

Accepted version of an article from Journal of Economics and BusinessThis paper examines the extent to which publicly listed companies across Sub-Saharan African countries have adopted “good corporate governance” practices. We investigate the association of these practices with companies’ accounting performance and market valuation. The findings indicate that companies across Sub-Saharan Africa have only partly implemented good corporate governance practices. We find a positive association between our constructed index of good corporate governance practices and accounting performance. However, we find a negative association between the corporate governance index and the market valuation. When the sub-indices are considered, we find that only the board of directors and the audit committee sub-indices are associated positively and significantly with accounting performance. However, we find that only the audit committee sub-index is associated negatively and significantly with market valuation

The Impact of Entrepreneur-CEOs in Microfinance Institutions: A Global Survey

- Peer reviewedMicrofinance is a global high-growth industry, in which entrepreneurship is prevalent and substantial. Based on the theoretical argument that microfinance entrepreneur-CEOs are “motivated agents” with a unique ability to hire and socialize mission-oriented staff, we hypothesize that these CEOs produce more sustainable microfinance institutions with better social performance and lower costs. This study utilizes data from 295 microfinance institutions in 73 developing countries, assessed between 1998 and 2010. Our empirical evidence suggests that entrepreneur-managed microfinance institutions feature higher social performance, greater financial sustainability, and lower costs

The Effect of Language Use on the Financial Performance of Microfinance Banks: Evidence From Cross-Border Activities in 74 Countries

This multi-year study examines the relationship between financial performance and language use, observing 405 partnerships between microfinance banks and their international financial partners in 74 countries. Drawing on language research in international business, we find that microfinance banks based in English-speaking, French-speaking, and Spanish-speaking countries have higher performance. Furthermore, the linguistic distance between the home country of a microfinance bank and the home country of its international partner(s) is negatively related to its financial performance. Our large-scale study confirms the effect of language use on organization-level financial performance and extends research on language in multinationals from intra-firm to inter-firm relationships

The institutional determinants of private equity involvement in business groups – the case of Africa

This study examines the governance attributes of post-IPO (initial public offering) retained ownership of private equity in business group constituent firms in contrast to their unaffiliated counterparts, in 202 newly listed firms in 22 emerging African economies. We adopt an actor centered institutional-theoretic perspective in rationalizing institutional voids and the advantages of maintained governance by both business angels (BA) and venture capital (VC) private equity. Our findings reveal private equity retain higher post-IPO ownership in business group constituents compared to unaffiliated firms and that this is inversely moderated in the context of improving institutional quality – where this is particularly strong in case of foreign VC as opposed to domestic VC or BA. Our result adds to the literature on multifocal corporate governance mechanisms and the institutional determinants of private equity investment