Foreign Direct Investors as Change Agents

34 Pages Posted: 19 Nov 2012

See all articles by Kathy Fogel

Kathy Fogel

Suffolk University - Department of Finance

Kevin K. Lee

California State University, Fresno

Wayne Y. Lee

University of Arkansas - Sam M. Walton College of Business

Date Written: July 18, 2012

Abstract

Institutional theory suggests that informal institutions effectively constrain human behavior. Culturally embedded norms and values align corporate governance with socially acceptable outcomes. We argue that foreign direct investors can act as agents of change in corporate governance. Investigating changes in ownership and control of Swedish firms, we find that foreign direct investors’ participation in conjunction with a reduction of control by the largest domestic shareholder improves firm performance through more efficient capital utilization and labor productivity as firms move away from a Swedish stakeholder orientation toward an Anglo-American shareholder wealth maximization focus.

Keywords: Foreign Direct Investors, Informal Institution, Business Culture

JEL Classification: G32, G34, F65

Suggested Citation

Fogel, Kathy and Lee, Kevin K. and Lee, Wayne Y., Foreign Direct Investors as Change Agents (July 18, 2012). Available at SSRN: https://ssrn.com/abstract=2177722 or http://dx.doi.org/10.2139/ssrn.2177722

Kathy Fogel (Contact Author)

Suffolk University - Department of Finance ( email )

8 Ashburton Place-Beacon Hill
Boston, MA 02108-2770
United States

Kevin K. Lee

California State University, Fresno ( email )

5241 North Maple Avenue
Fresno, CA 93740
United States

Wayne Y. Lee

University of Arkansas - Sam M. Walton College of Business ( email )

Fayetteville, AR 72701
United States

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