A Literature Review of Foreign Ownership and Company Performance

The purpose of this article is to review the results of research papers conducted in the area of foreign ownership impact on company's performance and to highlight the specifics of this linkage in the environment of transition economies. Several authors have documented greater efficiency of private companies compared to state-owned. According to different studies, an alternative option for transition economies is foreign ownership. Recent studies show that the effect of ownership forms on companies and financial performance is more significant in Eastern European countries compared to developed countries. However, study results are often contradictory, therefore they require additional research. 1. Introduction There is a rich dedicated literature throughout the world investigating the impact of the ownership structure upon performance (Mihai, 2014). Performance represents confirmation of the company's efficient activity and it reflects the manner in which the company knew to valorise the available resources (Mironiuc, 1999). The company performance is a multidimensional concept which contains various aspects, such as the operational efficiency, the reputation or the survival of the organization. However, the most studied aspect of the company performance is the economic and financial one – to reach the company's economic goals (Radu, et al., 2013). The ownership structure influences the company performance from several viewpoints. Firstly, the differences in the identity of shareholders, the different degrees of concentration, the distribution of resources among the shareholders influence their power and ability to control the managers. Secondly, the shareholders' different objectives influence company performance in different ways. For instance, the financial investors are mainly interested in the short-term returns of their investments, whilst shareholders, such as non-financial corporations, are mainly interested in establishing a long-term relation with the company they invested in. The ownership structure can be studied from multiple perspectives: the typology of investors/ shareholders (managers, individuals or families, the state, institutional investors, corporations, etc), the origin of their equity capital (domestic capital, foreign capital) or the ownership concentration degree.