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Institutional investors and international investments in emerging economy firms: A behavioral risk perspective

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journal contribution
posted on 07.12.2018, 11:58 authored by Vidya Sukumara Panicker, Sumit Mitra, Rajesh Srinivas Upadhyayula
While the extant literature has examined the influence of controlling and non-controlling principals on the internationalization decisions of emerging market firms, heterogeneity among non-controlling principals is largely ignored. The risk characteristics of different groups of owners, shaped by their institutional environments, could contribute to the differences in their preferences for firm internationalization. In this paper, we draw insights from institutional theory and behavioral risk perspective to examine the risk propensities and risk perceptions of various non-controlling principals, such as pressure-resistant (FIIs and mutual funds) and pressuresensitive (banks, insurance companies and lending institutions) institutional investors. Empirical results from a sample of 2364 unique Indian firms during the 2005-2014 time-period show that, after controlling for firm-level resources and capabilities identified in prior literature, the ownership share of different types of institutional investors is associated with firms’ international investments differently. While pressure-sensitive institutional investors, such as banks and insurance companies, are not supportive of foreign investments by firms, pressure-resistant institutional investors, such as FIIs and mutual funds, are supportive of this strategic decision. Furthermore, our results show that the family ownership in a firm (measured in terms of family shareholding) further lowers the preference of pressure sensitive institutional investors for internationalization, whereas family ownership positively moderates the pressure resistant investors towards internationalization.

History

School

  • Business and Economics

Department

  • Business

Published in

Journal of World Business

Volume

54

Issue

4

Pages

322-334

Citation

PANICKER, V.S., MITRA, S. and UPADHYAYULA, R.S., 2019. Institutional investors and international investments in emerging economy firms: A behavioral risk perspective. Journal of World Business, 54 (4), pp.322-334.

Publisher

© Elsevier

Version

AM (Accepted Manuscript)

Publisher statement

This paper was accepted for publication in the journal Journal of World Business and the definitive published version is available at https://doi.org/10.1016/j.jwb.2018.12.002

Acceptance date

02/12/2018

Publication date

2019-06-03

Copyright date

2019

ISSN

1090-9516

Language

en