Internal equity financing and the performance of multinational subsidiaries in emerging economies

  • Nguyen Q
  • Rugman A
  • 51

    Readers

    Mendeley users who have this article in their library.
  • 9

    Citations

    Citations of this article.

Abstract

We examine the internal equity financing of the multinational subsidiary which retains and reinvests its own earnings. Internal equity financing is a type of firm-specific advantage (FSA) along with other traditional FSAs in innovation, research and development, brands and management skills. It also reflects subsidiary-level financial management decision-making. Here we test the contributions of internal equity financing and subsidiary-level financial management decision-making to subsidiary performance, using original survey data from British multinational subsidiaries in six emerging countries in the South East Asia region. Our first finding is that internal equity financing acts as an FSA to improve subsidiary performance. Our second finding is that over 90% of financing sources (including capital investment by the parent firms) in the British subsidiaries come from internal funding. Our third finding is that subsidiary-level financial management decision-making has a statistically significant positive impact on subsidiary performance. Our findings advance the theoretical, empirical and managerial analysis of subsidiary performance in emerging economies.

Author-supplied keywords

  • South East Asia/ASEAN
  • internal equity financing
  • internalization theory
  • pecking order theory
  • subsidiary performance
  • subsidiary-level financial management decision-making

Get free article suggestions today

Mendeley saves you time finding and organizing research

Sign up here
Already have an account ?Sign in

Find this document

Authors

  • Quyen T.K. Nguyen

  • Alan M. Rugman

Cite this document

Choose a citation style from the tabs below

Save time finding and organizing research with Mendeley

Sign up for free