The Impact of Foreign Ownership on Firm Performance, Evidence from an Emerging Market: Turkey

Abstract

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. This study employed panel data analysis on a sample of 205 non-financial listed companies covering the 3 year time period from 2005-2007. The results indicated that minority foreign-owned companies (MIN) perform better than domestic ones (DOM) in terms of operating profitability. 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.