INFLUENCE OF LOCAL VERSUS FOREIGN CORPORATIONS, AS SHAREHOLDERS, ON FINANCIAL PERFORMANCE OF ROMANIAN LISTED COMPANIES

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By: ALINA ČšARAN, MARILENA MIRONIUC
JEL: M40, G32, L25
Keywords: corporate shareholders, foreign ownership, ROA, ROE.

In the actual context of global mobility of investors and capitals, diverse categories of local and foreign shareholders (institutional investors, governmental agencies, corporations or individual investors) influence business activities, management and results of the owned entities. Shareholders’ monitoring ability is related to their interests and their involvement in the investee’s business. This study contributes to the on-going debate referring to local and foreign shareholders and investigates the influence of both local and foreign corporate shareholders on financial performance of Romanian listed companies during 1997-2016. Results of fixed-effects panel regression analysis reveal that local corporations positively influence the profitability of their affiliates, as measured by ROE. However, foreign corporate shareholders do not significantly influence financial performance of Romanian entities. Thus, the expected benefits associated with foreign ownership do not enhance the performance of local companies. These findings helps future privatisation or investment decisions in Romanian listed companies. Moreover, the results raise further questions regarding the interests of foreign companies investing in Romanian stock market.