Impact of Foreign Ownership on Performance: Evidence from China

This thesis examines the direct effect of foreign ownership on firm performance in China. Data from 625 publicly listed stocks over 5 years was analyzed. Findings show no significant relationship between foreign ownership and firm performance, but age of firms is positively related to performance.

Impact of foregin ownership on PERFROMANCE; EVIDANCE fromChina
[Document subtitle]
OCTOBER 10, 2021
Abstract:
This thesis has attempted to examine the Direct effect of Foreign Ownership On Firm
Performance In China.
Data and Methodology: Data of 625 publicly listed stocks both in (SSE)or Shanghai Stock
Exchange & (SZSE) Shenzhen Stock Exchange over the period of 5 years 2015-2019, A total
of 3125 years of data.
Findings: There is no significant relationship between Foreign ownership and firm
performance. Secondly, in terms of firms characterises, In China the age of the firms is found
to be positively related with the performance.

Table of Contents
Table of Contents............................................................................................................................1
1.1 Background of the study...........................................................................................................4
1.2 Research problem......................................................................................................................5
1.3 Research Questions and Objectives..........................................................................................8
1.3.1 Research Questions...................................................................................................................8
1.3.2 Research Objectives..................................................................................................................8
1.4 Justification of the study in China context................................................................................8
1.5 Scope of the study......................................................................................................................9
1.5.1 The Scope of study...................................................................................................................9
1.5.2 Research methodology..............................................................................................................9
1.6 Structure of the Study...............................................................................................................9
CHAPTER 2: LITRATURE REVIEW........................................................................................10
2.1 Introduction.............................................................................................................................10
2.2 Theoretical Framework...........................................................................................................10
2.2.1 Direct Impact of Foreign Ownership on Firm Performance....................................................10
2.2.1.1 The Eclectic Paradigm.........................................................................................................10
2.2.1.2 Variables of Eclectic Paradigm............................................................................................11
A) Ownership-specific Advantages.............................................................................................11
B) Location Specific Advantages................................................................................................12
C) Internalization advantages......................................................................................................12
2.3 The Resource-based Theory....................................................................................................13
2.4 The Relationship Between FO and Firm Performance...........................................................14
2.4.1 Linear Relationship.................................................................................................................14
2.4.2 Non-Linear Relationship.........................................................................................................16
2.4.3 No Relationship......................................................................................................................17
2.5 Firm Performance...................................................................................................................18
2.6 Conclusion...............................................................................................................................19
CHAPTER 3: RESEARCH METHODOLOGY..........................................................................20
3.1 Introduction...............................................................................................................................20
3.2 Data...........................................................................................................................................20
Table 3.2.1: Descriptive Measures of the key variables................................................................21
Table 3.2.2: Descriptive Statistics.................................................................................................21
3.3 Direct Effect of Foreign Ownership on Firm Performance........................................................22
3.3.1 The Variables......................................................................................................................23
3.4.1 Empirical Model...................................................................................................................26
CHAPTER 4: DATA ANALYSIS...........................................................................................................27

4.0Introduction...............................................................................................................................27
4.1 Statistical analysis.....................................................................................................................27
4.2 Hypothetical framework...........................................................................................................28
4.2.1 Hypothesis 1:..........................................................................................................................29
4.2.2Data analysis through regression equation.............................................................................29
Model Summary..........................................................................................................................29
4.2.2.1 Interpretation of the results............................................................................................30
4.2.2.2 Analysis of Variance.........................................................................................................31
4.2.2.3 Interpretation of the Coefficient......................................................................................32
4.3 Hypothesis 2..............................................................................................................................34
4.3.1 Interpretation of the results...................................................................................................35
4.3.2 Analysis of Variance................................................................................................................35
4.3.4 Interpretation.........................................................................................................................36
CHAPTER – 5 DISCUSSION ON THE FINDINGS...................................................................................39
5.0 Impact of Foreign ownership on Chinese listed firms................................................................39
5.1 Positive relationship(U-shape)...................................................................................................39
CHAPTER 6: CONCLUSION AND RECOMMENDATIONS....................................................................41
6.0 Conclusion.................................................................................................................................41
6.1 Implication of the study.............................................................................................................42
6.2 Limitations and strength............................................................................................................42
6.3 Recommendations.....................................................................................................................43
References.....................................................................................................................................44

Acknowledgment

1.1 Background of the study
In the past 2 decades Foreign Direct Investment (FDI) and Portfolio Investment (PI) has
completely changed world economic system. China became one of the most attractive
destinations for Foreign Direct Investment (FDI) amidst global economy slowdown and
political uncertainty in other countries. According to a UNCTAD report, in 2020, China
attracted US$161bn of FDI compared to US$141.2bn in the previous year indicating a 11%
increase in FDI (Thematic Report, 2020).
Figure 1-1: Level of FDI in China from 2005-2019
(Source: Thematic Report, 2020)
Figure 1 above depicts the rise of FDI in China for the past 15 years. A noticeable increase in
outward FDI in the recent years indicates China might become a less favourable destination
for FDI in the future. However, China has made itself a more investment-friendly destination
with reforms to legislations and protecting shareholders’ rights. China was ranked 31st out of
190 countries in the World Bank’s Ease of Doing Business ranking for 2020. Today, China
remains as the second largest recipient of capital in the world. Similarly, the country was
also ranked as one of the best regulatory performances in the world.
In recent years, the importance of MNCs has grown substantially and many developing
countries are competing to attract more and more FDI and consider it the main engine of their
economy.MNE as ‘an organization which engages in FDI, owns, and controls value-added
businesses in multiple geographical areas’ (Dunnings and Lundan, 2008).

1.2 Research problem
Given the importance of foreign investments as a source of capital, numerous studies have
undertaken the motivation behind FDI and how to attract foreign capital and sustain them
over a period in a host-country through adopting policies. Firstly, determinants and the effect
of FDI are often studied at the country level. For example, a large body of literature exists on
the technology and know-how transfer in the host country. (Bwalya,2005), (Liu,2006),
(Kamal,2015) and (TŐKÉS,2019).
Secondly, the impact of foreign ownership on firm performance has been generally analysed
based on specific industries (Phung and Vyle,2013), (Jusoh,2015) and (Nofal,2020).
However, very few researchers have attempted to analyse the effect of FDI at the firm level,
where the focus is on the impact of foreign ownership and firm performance when compared
to domestic firms in the same country. Furthermore, existing theories and frameworks which
are used to analyse the relationship between FDI, and firm performance provides assertingas
to whether foreign ownership has positive/negative direct or indirect effect on firm
performance.
With regards to the direct effect of foreign ownership, Electric paradigm determines the
impact of competitive advantage according to the patterns of international productions of
(Dunning,1988; Dunnig,2001) over their purely domestic firm. These theories and framework
argue that for a foreign investor to operate outside its home country as a MNC,these three
conditions must be satisfied:
1) unique and sustainable ownership-specific advantages over their domestic
competitors. The extended version of Electric paradigm further breaks it down to Oa
asset-based advantage, and Ot transaction-based advantage.
2) the extent to which the company perceives it is useful to add to its O advantages
rather than to sell them to other foreign firms (Internalization Advantages – “I”).
3) the extent to which companies are interested in creating, accessing, or utilizing their
“O” advantages in a foreign location (Location Advantages – “L”).
Therefore, a firm must have sufficient ownership(monopolistic advantage) to compensate the
cost of operating as a multinational company.

Understanding the dynamic nature of MNCs, (Dunning,2000) further explains that O
advantages are not limited to firm-specific; these capabilities are either created internally or
acquired externally through business networks.
Similarly, L advantages are not restricted to specific geographical region(country-specific); it
can be in the region or even a cluster of regions. Following these theories(Srithanpong,2012)
studied the impact of foreign ownership in Thai companies and concluded that, foreign
ownership positively correlated with higher wage and better management capabilities.Their
conclusions are in line with (Chhibber and Majumdar,1999) where they analysed the impact
of foreign ownership on Indian firms.Similarly, (Anttila et al, 2014) in their paper focused on
the Finnish listed stock and concluded that foreign owned firms in Helsinki stock exchange
tend to show higher labour productivity, superior management skills and greater global
distribution networks.
While growth prospects of MNCs, particularly by addressing country-specific advantages
(CSA) or firm specific and firm specific advantages (FSA) (Rugman,1981) or the theory of
dynamic ownership (Dunning,2001) such as asset-based and transaction-based advantages are
largely unchallenged,we know very little about the causes and the outcomes of these
advantages at the firm level.
Adding to that complexity of the relationship, the level of ownership has also its own
complexities.For example, in the case of the Turkish economy, firms with more than 51%
tend to negatively affect return on asset (RoA) while firms with low foreign percentage show
a positive relationship with performance (Yavaş and Erdoğan, 2016). But in the case of
Vietnamese listed firms, foreign ownership lower than 50% has negative impact on the firm
performance when compared to domestic firms (Phung and VyLe,2013).The following
conclusion can be made on these findings: firstly, the relationship between performance and
foreign ownership is nonlinear. Secondly, country specific advantages might not be very
scientific as the country might have some specific disadvantages as we have seen in the case
of Vietnamese firms where foreigners are limited to only 49% shares and are not able to
increase their shares beyond that.
Lastly, the direction and the shape of the relationship between foreign ownership and firm
performance further widen the gap. There is no relationship between performance and
ownership (Tawfeeq and Abdullah), inverted U-shape relationship, if foreign ownership
increases beyond 36.26% it negatively affects company performance (Phung et al.,2021). U-

shape relationship firms with less than 50% foreign shares perform better than domestic firms
but firms with more than 50% foreign ownership tend to destroy value and negatively affect
RoA (Gurbuz and Aybars,2010) and direct and positive relationship(Douma, George and
Kabir,2006).
Therefore, the lack of strong evidence on the impact of foreign ownership on firm
performance raises questions on the benefits of foreign investments in a country. While there
is strong competition among firms in China to attract foreign investments, the real
performance of these investments at the firm-level, and degree of effectiveness are yet to be
explored. Most of the previous papers have recommended country specific policies such to
avoid increasing foreign shares to control knowledge and technology transfer from the
country of origin (Ylä,2004). On the other hand (Anil and Mishra,2014) suggest that
Australian firms should encourage more foreign investments to diversify their risk.
Implementing certain polices at the firm level may not be possible in the case of Chinese
firms as they are bound to obey country and state level policies. To the best of the author’s
knowledge, there is no study, to date, that has examined the relationship between foreign
ownership, the optimal level of ownership and performance in China.While taking into
consideration the possibility of a direct/indirect or even non-linear relationship. Technology
spill over and managerial improvements are considered as the indirect impact of foreign
ownership, potential endogeneity across the firms in the sample. Thus, to address this
research gap, this study intends to fully consider all factors in assessing the relationship
between foreign ownership and firm performance among Chinese firms, thereby ensuring
robust and reliable results.
1.3 Research Questions and Objectives
1.3.1 Research Questions
The main question of this study is to find out:
To what extent foreign ownership affects a firm’s performance in the context of
China?
The main research questions will be answered by exploring firm characteristics through
following secondary questions:
 To what extant size affect firm performance?
 To what extent ownership-level affect firm performance?

 To what extent age affect firm performance?
 To what extent capital intensity affect performance?
1.3.2 Research Objectives
The main objectives of this paper are as follow:
 To shed light on the impact of foreign ownership on firm performance at the micro-
level.
 To explore the direction and the relationship of firm characteristics such as (Size,
ownership-level, age, and capital intensity) with their performance.
 If the direct relationship is non-linear, to quantify the optimal level of foreign
ownership in each country.
1.4 Justification of the study in China context
Southeast Asia, particularly China, is a persuasive country to undertake the impact of foreign
ownership on a firm’s performance. Most of the developing countries see FDI as the source
of growth and all are competing to attract foreign investments in the region. Furthermore, this
study will provide insights to investors in terms of a firm’s performance and the optimal level
of ownership in the country. For domestic firms it also provides insight on the level of control
they can give to foreign shareholders if they want to maximise their shareholders’ value. At
the country level, it might also provide insights in terms of job creation and economic
growth.
1.5 Scope of the study
1.5.1 The Scope of study
This paper attempts to analyse post-impact of Foreign Direct Investment in China, with
respect of foreign holdings at the firm-level on the Shenzhen Stock Exchange (SZSE) and
Shanghai Stock Exchange (SSE) of China. The literature review of this paper will focus on
the direct effect of foreign ownership on performance and how firm characteristics such as
size, ownership-level, age, and its capital intensity influence their performance. The study
covers a period of 5 years from 2015 to 2019. Unlike most of the past studies of this nature,
the sample includes financial firms but winsorise extreme outliers for other firms.

1.5.2 Research methodology
To assess the empirical relationship between Foreign ownership and firm performance, this
paper in the first step using OLS or ordinary least squares to assess the relationship between
IVs(FO=percentage of foreign ownership),(SIZE=Netincome),(AGE=IPO_date)and
DVs(RoA, Tobin’s Q). to satisfy the second objective, which the optimal level of foreign
ownership , we are going to create a dummy variable for the foreign ownership level
categorizing into(Low, Medium, High) and test the optimal level of foreign ownership using
2SLS or 2 stage-least squares regression to test the relationship.
1.6 Structure of the Study
The remainder steps of the study are as follows:
Chapter 2 presents the literature reviews and the theoretical foundation for test used to
analyse the relationship, the nature of the relationship and the direction of the relationship.
This chapter also cover an extensive revies of the past studies of similar nature, their findings
for each variable used in this study . It also shades light on the literature gaps that exists and
the main purpose of this paper. of the theoretical foundations on the direct and spill over
effects of foreign ownership on firm performance. This chapter also includes a
comprehensive review of empirical studies on the topic, which is subdivided according to
financial performance and firm productivity. Subsequently, chapter three explains the nature
of data gathering, data cleaning and outliner handling. In Chapter 4 the results from each of
the models are presented, together with an analysis of the findings. Chapter 5 provides
answers to the research questions and attempts to draw inferences from the findings. The
final segment of this chapter details the potential weaknesses of this study, recommendations
for future research on the topic and the conclusion of the study.

CHAPTER2: LITRATURE REVIEW
2.1 Introduction
This chapter, covering of the theoretical framework and review of empirical evidence centred
around the direct and indirect impact of foreign ownership on firm performance. Existing
empirical studies proving the enhanced results of foreign direct businesses in host nations and
technological indirect effects from all these companies to their local competitors reinforce
accepted thinking that FDI can improve host country efficiency. Caused by the financial
disasters of the 1980s and 1990s, FDI has become the preferred type of foreign investment
for developing markets, as it is deemed secure than some other forms of direct investment. As
a consequence, many advanced economies offer tax and other advantages to attract Foreign
direct investment, and Foreign investment to these nations have increased dramatically over
the last 3 decades. To fully explain the relationship between the percentage of foreign
ownership and firm performance, this study adopts the OLI Framework from Dunnings
(1988) which integrates elements of FDI and Trade Theories and bridges between Macro and
Microeconomics (Shanker,2007), a multi-theoretical approach by integrating components of
financial and economic theories. After adjusting for unobserved heterogeneity factors that
significantly ex-ante purchase choices, Fons-Rosen et al. (2013) conclude that FDI has a very
little impact on its performance companies' efficiency in their collection of developed
European nations. The empirical evidence consists of prior studies on this topic and is
reviewed based on three sub-topics: Financial Performance, Productivity and FDI Spillovers.
2.2 Theoretical Framework
2.2.1 Direct Impact of Foreign Ownership on Firm Performance
The chosen theories in this section aim to explain a more holistic understanding of the direct
relationship between dependent and independent variables.
2.2.1.1 The Eclectic Paradigm
In 1958, John Dunnings in his PhD research paperfound out that American firms operating in
Britain tends to be less productive than their parents but more productive than their domestic
competitors. And he hypothesised that these production differences could be explained by the
locational and ownership-specific differences (Dunnings,2012). Therefore, the
EclecticParadigm proposition itself in explaining the extent and the pattern of international
production financed by FDI and managed by MNEs. It asserts that at any given moment of
time for an MNE to operate successfully these three conditions must be satisfied:

(1) The (net) unique and sustainable ownership-specific advantages over their domestic
competitors in a particular market. The extended version of Eclectic Paradigm further
breaks it down Oa to asset-based advantage, or privileged access to a set of income-
generating assets, and Ot transaction-based advantage or the ability to co-ordinate
these assets with others across national boundaries in ways to get competitive
advantage relative to their competitors.
(2) The extent to which the company perceives it is useful to internalise such ownership
advantages in the market in generating more value or to sell them to other foreign
firms (Internalization Advantages – “I”).
(3) The extent to which companies are interested in creating, accessing, or utilizing their
“O” advantages in a foreign location (Location Advantages – “L”) (Dunnings,2012).
In a way it offers a more holistic explanation of FDI and international productions. Eclectic
Paradigm includes three variables: ownership-specific (O), location-specific (L), and
internalization (I). The significance and interdependency of variables differ across industries
and countries. For example, in China most forging firms could not fully internalise or sell
their R&D and brand value due to lose copyright law in China.
OLI variables are grounded in the economic and IB theories. For example, in terms of
locational factors, labour cost in China was one of the most significant determinants of
explaining locational advantage for MNEs and international production. Thus, OLIin a way
links the macroeconomic theory of international trade (L) and the microeconomic theory of
the firm (O and I) (Shanker, 2007) and attempts to provide a more comprehensive
explanation of FDI than other theories such as: Product Life Cycle, Internationalization, and
the Monopolistic Advantage Theory. In the case of intra-country or sub-national economic
determinants of FDI, it enables foreign investors to have a more flexible approach to political
dynamics of location factors (Amal et al.,2020).
2.2.1.2 Variables of Eclectic Paradigm
A) Ownership-specific Advantages
Ownership advantages are the most direct and inherent factors that give firm a strategic edge
in a global market. (Dunning, 1988) breaks down ownership advantages into (Oa) Asset-
based Advantages and (Ot) Transaction-based Advantages. Ownership advantages are
defined as ‘proprietary ownership-specific assets held by MNEs and Ot is the ability of the
firm to add more value from its transaction with external market relative to its competitors’.

According to (Barry,1991), Oa and Ot naturally fit into the broader concepts of strategic
resources as explained by (Tallman,2004).These firm specific advantages construct routines
and capabilities in which firms could operate more effectively in capturing more value. These
resources and capabilities reflect the monopolistic power of MNEs which creates imperfect
market condition for the firms to generate more values and allows us to focus on the internal
capabilities of an MNE when analysing their performance (Li et al.,2005). Foreign ownership
of target enterprises is also found to enhance production, employment, and earnings when
compared to domestically acquired companies. This could be because, as past empirical
research have demonstrated, improving economic position can help firms boost sales volume
and market shares compared to their competitors. Overall, our empirical findings imply that
foreign ownership improves host countries through the usual services: Foreign ownership can
significantly reduce target enterprises' budget constraints and encourage them to engage in
external trade, leading to increased production, jobs, and labour income. Nevertheless, there
is no strong proof that foreign ownership boosts business efficiency when compared to
domestically.
B) Location Specific Advantages
According to Tallman (1991), a multinational corporation's most important strategic choice is
deciding which items to sell in which markets. Dunning's OLI compares and contrasts
location elements in two different contexts in order to understand the patterns of international
output in specific places (Duning, 1988). According to academics, for an MNE to set up
manufacturing units in a host nation, it must have or supply a bigger population than the
home country. Researchers have increasingly recognised the relevance of a knowledge-based
economy and have begun to incorporate the aspect of location into their study (Tallman,
2004). A MNE location or the host nation can provide either knowledge-based resources like
infrastructure, human resources, and a high level of education, or institutional resources like
alliances and agreements.
Locational determinants increase a firm’s competitive advantages only when the
firm’s capabilities are integrated with the resources availed in that location. The Eclectic
Paradigm considers MNEs as rational entities that are attempting to create imperfect market
conditions and explains the question why an MNE enters a specific market via FDI (Li et
al.,2005). In comparison to domestically bought enterprises, foreign-acquired companies
depend less on features supported borrowing and depend more on internal assets,
underscoring the benefits of foreign ownership in easing credit rationing experienced by

firms listed. Monetary situation has improved in a clinically important and numerically
important way. For example, two years after the purchase, the liquidity of export enterprises
grew by nearly four percentage points compared to domestic-acquired firms, a significant rise
from the was before average of 11%. They also show that FDI from Hong Kong, Macau, and
Taiwan improves listed companies' financial situations further than FDI from those other
origins, implying that FDI's effectiveness differs depending on where it comes from.
C) Internalization advantages
Internalization advantages refers to the unique inherent within MNE’s hierarchy in
internalizing cross-border transactions for immediate products such as skills, expertise, and
know-how (Li et al., 2005). Researchers differentiate internalization factors from Ot factors
as most of internalizations factors is conditional to the knowledge intensity and indivisibility
of each product such as patent and copyright advantages (Rugman, 1981). While ownership-
transactions advantages are a specific set of activities that influences the competitiveness of
an individual company and their ability to sell to competitors, OLI attempts to explain why
firms decide to internalise markets into hierarchical forms rather than licensing or exporting
such skills into the foreign market (Dunning, 1988). As stated by (Brusoni et al., 2001),
structural decisions not only help firms overcome transactional market failure, but it also
creates different types of organizational advantages especially in terms of a merger and
acquisition (Guisinger, 2001) in his extended OLI model called OLMA or adjusted OLI,
explains that Ownership truncations advantages focuses more on the control of a subsidiary,
while the internalization advantages interact with the full strategic choices of an MNE.
Therefore, it is in a better position to explain the degree and the patterns of internalization
into global strategic management.
2.3 The Resource-based Theory
The Resource-based theory was proposed by Barney in 1991.According to this theory; firms
gain competitive advantage when it owns resources with unique, rare, valuable, and
irreplaceable attributes. Similarly, in developing countries, companies also gain competitive
advantage from access to such resources (Duong et al., 2021). In fact, the performance of a
firm, according to this theory, depends on the resources it owns or has access to.
Unlike Eclectic Paradigm, the impact of foreign ownership on firm performance according to
this theory depends on the types of ownership and that performance is substantially different

from the institutional foreign owners to corporates (Douma et al., 2006). As stated by
Aguilera and Jackson, 2003, the inequality which exists between different types of
shareholders significantly influences a firm’s performance. For example, short-term
shareholders might not be interested in having long-term strategic assets such as R&D
investments, but on the other hand, long-term owners or shareholders might think otherwise.
Therefore, these, in a way, affect the firm’s performance.
Different types of shareholders have different objectives. For instance, if the firm’s shares
perform badly, institutional shareholders might just opt for the sell option rather than
investing their time to restructure the company (Douma et al., 2006). Thus, foreign
institutional shareholders, as they are not interested in technical structure of the firm, nor are
they interested in the long-term objectives of the company; they are expected to have a
moderate effect on firm performance (Aguilera and Jackson, 2003).
In contrast, as Aguilera and Jackson (2003) point out, foreign corporate shareholders tend to
invest strategically and are not always financially motivated, such as to sustainable
competitive advantage corporate social responsibility and skills development in the host
nation. Strategic foreign shareholders use their ownership interests to capitalize on their
strategic interests, including access to new markets, location-specific resources, and
inexpensive manufacturing facilities (Douma et al., 2006). Its overseas affiliation also
associates local companies with high-profile technical, administrative, and financial resources
(Chibber and Majumdar, 1999). These shareholders increase profitability by increasing sales
and reducing costs due to additional and/or superior resources, such as technology from
multinational companies, combined with new market access enabled by affiliated local
companies (Anderson and Liao, 2019) . There is considerable heterogeneity between these
stakeholder groups in terms of resources and organizational skills, which affects the
performance of the company (Douma et al., 2006).
In a study (Kronborg and Thomsen) in 2009 based on 110 years of data, it was found that
foreign owned firms enjoy the benefits of access to resources such as brand, knowledge and
capital which significantly increase their performance and survivorship.
In summary, the resource-based theory states that resources that create a competitive
advantage within a company have a positive impact on the company's performance and that
such resources are more likely to be provided by strategic foreign shareholders, suggesting a
positive relationship between foreign ownership and corporate performance. .

2.4 The Relationship Between FO and Firm Performance
A huge body of literature exists on the relationship between foreign ownership and firm
performance. The end ogeneity which exists between these two variables and the
measurement of performance resulted in mix findings. The empirical findings of previous
studies are categorised into (Linear, Non-linear, and No-relationship).Similarly,
(Mishra,2014) examined the impact of free float foreign ownership on performance in
Australia, applying Blundell-bond regression, found that in Australia, firms with foreign
shareholders tend to outperform domestic firms. This is because the pressure of foreign
shareholders pushes local mangers to increase the firm’s value.
2.4.1 Linear Relationship
Douma et al (2006) studied the impact of foreign institutional and foreign corporate
ownership on the performance of1005 Indian firms at Bombay Stock Exchange (BSE) over
the span of 2 years 1999-2000, using Ordinary Least Square regression. The results showed
firms with foreign ownership recorded superior performance to that of domestic firms.
Measuring performance based on accounting data of RoA and Tobin’s Q, it was concluded
that as foreign ownership changes from high to medium or low, their monitoring change as
well which indirectly impacted the firm’s Return on Asset (RoA) drastically, causing it to
decrease which indicates that there is a linear relationship performance. (Majumdar et
al.,2015) also studied the relationship between the level of foreign ownership and Indian
firms’ performance and found similar results.
Huang and Shiu (2009) examined the impact of foreign ownership on business performance
in Taiwan. In contrast to Douma et al. (2006) treated foreign ownership as an endogenous
variable and used the Two Stage Least Squares (2SLS) estimate to account for endogeneity.
Despite the different assumptions, Huang and Shiu (2009) obtained similar results to those of
Douma et al. (2006), since companies with high foreign participation outperformed
companies with low proportions. Huang and Shiu (2009) attribute superior performance to
the ability of foreign investors to select more profitable investments, given the resources that
allow them to conduct basic research. The authors further argued that foreign investors also
make contributions to technology, finance, and expertise, thus increasing the credibility and
reputation of the company compared to domestic investors.
.

Another similar study was conducted by (Nakona and Hgyyen,2012) on the Japanese
electronics industry on 198 companies from Tokyo Stock Exchange, adopting OLS or
ordinary Least Square regression. They found that those Japanese electronics companies with
foreign ownership enjoy higher RoA than the domestic firms. For example, a 10% increase in
foreign ownership is associated with a 0.9% increase in RoA or performance. This is in line
with the findings of similar studies in the German service industry and the Egyptian non-
financial stock respectively, (Grlubcke, 2011; Azzam,Fauad and Ghosh,2013).
A more recent paper on this topic was conducted by Abdullah (2018).In that paper, the
researcher examined the impact of foreign ownership on Jordanian non-financial companies
where firm performance is calculated based on a firm’s market share. Similarly, this paper
calculated foreign ownership based on the number of shares held by foreign nationals in a
company regardless of their structure. Using multi linear regression together with lagged
regression models, it was found that there is a significant positive relationship between a
firm’s market share and the level of foreign ownership, and as a firm’s foreign ownership
increases its market share, it also indicates a liner relationship between these two variables.
However, not all studies have found that foreign-owned companies perform better than non-
foreign-owned companies. For example, Kim and Lyn (1990) found that foreign firms
operating in the United States were not as profitable as domestic US firms. The authors
argued that while foreign companies spend a lot of time on research and development (R&D),
they don't pay enough attention to advertising, resulting in lower performance.
2.4.2 Non-Linear Relationship
Contrarily, to positive and linear relationships, empirical studies also identified Non-linear
relationship between foreign ownership and company performance. (Vinh, 2014) compared
the performance of firms with foreign shareholders versus domestic firms. Adapting to
Densest and Villaloga, 2001 model, he studied 567 publicly listed companies in Vietnam and
found out that firms with lower foreign shareholders indicate a positive relationship. For
instance, a 10% increase in foreign shares increases its RoA by3.6507 units but once foreign
shares increase beyond 40%, it takes a U-shape turn and decreases the RoA. This means there
is an ultimate percentage in foreign ownership and anything beyond that results in conflicts of
interest with local shareholders and reduces firm performance.

Likewise, Yavas and Erdogan (2016) wanted to analyse the relationship between foreign
ownership and firm performance in developing markets. Using generalised methods of
moment’s regression on 256 Turkish non-financial publicly traded firms over a span of 6
years, it was discovered that there is an optimal level of ownership and anything beyond that
level, foreign firms will suffer. For better understanding of the level of ownership, they have
divided the level of ownership into Majority or more than 50% shares and Minority with less
than 50% shares. Their regression showed that firms with majority foreign shares have lower
RoA than those with minority foreign shares. Their findings strongly support the idea of the
non-linearity nature of these complex relationships. They suggested that one of the reasons
could be that foreign shareholders may not have sufficient information about the domestic
dynamic nature of Turkish firms needed to make appropriate investment decisions.
To better explain the relationship between foreign ownership and firm performance Gu,Cao,
and Wong (2019)examined the mediation and moderation effect of international
diversification and competitive environment. Using empirical data of 35 years from Thomson
Financials, they concluded the impact of foreign ownership on American companies are
mediated and moderated by international diversification and locational parameters. In fact,
the existence of a higher percentage of foreign shares increases a firm’s international
diversification factors which lead to better performance.
In Vietnam, Phung and Hoang (2012) examined the relationship between business
performance and state and foreign ownership. All companies listed on the Ho Chi Minh and
Hanoi stock exchanges from 2007-2012 were included in the study sample. The author used
the PEF to estimate the relationship, as it controls for unobserved heterogeneity between
variables. Tobin's Q and RoA were used as performance indicators. The study found that for
both performance measures, state ownership and business performance have an inverse U-
shaped relationship, while foreign ownership and business performance have a U-shaped
relationship. Only when foreign ownership is concentrated do the benefits that the authors
attribute to increased vigilance come into play.
2.4.3 No Relationship
Although most of the previous studies found a mix of relationships between foreign
ownership and company performance, there is also a possibility of no direct relationship
between these two variables. For instance, in a study by (Gurbuz and Aybars,2010) overa
period of 3 years from 2005-2007 on the relationship between foreign ownership and firm

performance in Turkey, using Generalised Least Square to test regress, the relationship
between RoA and percentage of shares held by foreigners on Istanbul Exchange listed stocks
showed no relationship between undertaken variables. Barbosa and Louri (2005) studied the
difference between the performance of domestic firms and MNCs in Portugal using a sample
comprising 523 manufacturing firms in 1992. A quantile regression technique was used to
account for departures from the normality of firms’ profitability. The results showed no
significant difference in the performance. The inability of MNCs in Portugal to persistently
outperform their domestic rivals, despite their technological advantages, may be attributable
to the fact that they must provide compensation for their liability of foreignness.
Mihai (2012) also found no significant correlation between corporate performance and
foreign ownership in 63 Romanian companies listed on the Bucharest Stock Exchange in
2010. This study argued that the positive effects of foreign ownership were not observed.
Furthermore, most of the companies in the sample belonged to the manufacturing sector,
which was hit hard by the country's recession, meaning that falling demand due to weaker
industrial production directly affected the performance of a company regardless. of its
ownership structure. Wart (2013) also investigated the relationship between foreign
ownership and performance in South Africa for companies listed on the JSE. This study
compared the performance between foreign and domestic companies using RoA, ROE and
Economic Value Added (EVA) as performance indicators. The study found that foreign
ownership was not significantly related to RoA and ROE. However, Swart (2013) observed
some evidence of foreign ownership enhancing firm value, as foreign owned firms had a
4.6% higher EVA return compared to their domestic owned counterparts, but it was argued
that this might be the result of an accounting irregularity instead of true value-added.
2.5 Firm Performance
Both OLI paradigms and Resource based view theories suggests that MNEs are rational
entities assumed to be investing in countries that provide or give access to those capabilities
and resources essential for the success of an MNE (Dunnigs,2001). Firms’ performance from
the context of its shareholders varies across different industries and different regions.
As stated by Greenaway, Guariglia and Yu (2014), when the percentage of shares held by
foreign nationals in a company, it tends to be more productive, thus maximising the total
value of shareholders, but that increase might also translates as less profit available to
domestic shareholders, thus the level incentive gained by domestic shareholder decrease

which in turn affects firms’ total performance. In fact, the total profitability of a firm with
foreign shareholders depends on the amount of shares owned by foreign notions, hence the
overall profitability of the firm depends on the optimal percentage of share held by foreign
stockholders. For instance, (Al-Gamrh, 2019) analysed the impact of foreign ownership on
firm performance in UAE, he found no significant increase in performance and contrarily to
the precise findings they found that in UAE foreign ownership especially foreign national on
the board of directors have negative impact on firm’s performance.
Bentivogli and Miranda. (20170) undertook the impact of foreign ownership on Italian
companies. Adopting difference-in differences methodology they compared the domestic
firms with foreign owned firms. Their analysis showed that only true foreign ownership with
true is positively related with performance, while shell companies their parents operating in
tax heaven nations do not affect performance. Similarly, NGUYEN et al. (2020) studied the
impact of foreign ownership on the performance of 427 Vietnamese stocks, the authors
claimed that there are significant limitations in the empirical results of past literature mainly
due to their choice of methodologies and to not make the same mistake they have used GLS
regression. The results showed that foreign ownership is positively related with an increase in
RoA and RoE, but not with Tobin’s Q.
Information asymmetry and subsidiary control are extensively studied with the Agency
theory of international business developed by (Ross and Mitnick, 1971), it suggested that
when international business can fully monitor or reduce the information gap with their
subsidiaries in other countries, they are able to significantly reduce agency problems and
increase performance (Chhibber and Majumber, 1999; Douma et al.,2006; Al-Gamrh,2019).
Evaluate the relation among foreign ownership, productivity, and danger using agency theory
as an underpinning theory. They specifically look at whether overseas investment can boost
or decrease productivity and risk. In the other direction, it looks into whether share price and
risk have an impact on foreign stock holdings. According to the resource dependency
viewpoint, particular owners can supply critical resources for specific company practices,
including such innovation. Business owners seldom have all of the resources necessary to
engage in such operations (Choi et al., 2012). From this standpoint, it is reasonable to believe
that outside investors may assist in improving operational efficiency by supplying these
strategic assets.

2.6 Conclusion
A revise on the relationship between foreign ownership and performance shows that firm
performance is affected by many factors within the business environment. The empirical
studied shows a mix of findings with some studies claiming that firm performance is affect
by the degree of foreign ownership while others find no direct or significant relationship
between these two variables. While majority of the case found positive relationship between
foreign ownership and firm performance, there are also numerous literature that found no or
even negative relationship between these two variables. With respect to the impact of
intermediation and international diversification and locational factors showed a significant
impact on the level of firm performance. Lastly, performance measurement usually carried
out by analysing firms accounting data such as; ROE, ROA,ROS and Tobin’s Q, that makes
it very difficult for unified assumptions on the degree of impact.

CHAPTER 3: RESEARCH METHODOLOGY
3.1 Introduction
This chapter explains the data and methodology that are used to assess the impact of foreign
ownership on firm performance in China and answer our research questions. Firstly, dataset
and data collection methods are explained. Thereafter, the variables and the regression
models used to assess the direct relations between Dependent variables (DVs) and
independent variables (IVs) are described.
3.2 Data
To investigate the hypothesis developed in chapter1, this study utilizes Accounting data with
fiscal year ending 31 December 2019.The data used in this analysis consists of 2100 purely
domestic and 627 firms with foreign shareholders total 2727 firms of both financial and non-
financial firms listed in Shanghai stock exchange (SSE) and Shenzhen stock exchange
(SZSE) during the period 2015-2019 from Wind database a leading large-scale financial data
provider in mainland China and the percentage of foreign ownership were obtained from
China Finance Online Co through web scraping methods. It's a type of duplicating wherein
particular information is acquired and duplicated from the internet, usually into a centralized
local spreadsheet or database for access or examination afterwards. Web scraping is the
process of retrieving a website and obtaining data from that too. In terms of inconsistency and
outlier treatment firms with less than 1% foreign shares has been removed from the sample.
Percent Initial public offering date, Percentage of foreign ownership, Total market value, Net
profit, Return on assets, Total assets. A sample of listed firms presented in appendix B1. Data
was obtained from the firm’s consolidated annual reports. In this study the dependent
variables performance is calculated based on the RoA and Tobin’s Q. the independent
variables includes Total market value, Net profit, Return on assets, Total assets.
Contrarily to many previous studies on this topic such as (Nakona and Nguen,2013; Nguen et
all.,2020; Kao,Hodgkinson and jaffar,2018; Yavas and Erdogan,2016) which they have
focused only on non-financial firms, our sample included both financial and non-financial
firms. Likewise, unlike most previse studies, this sample attempts to cover all the industries
in China. It covers both primary industries such as Farming, Fishery, Forestry and farming
related services, beside that it also covers secondary industries in China such as Mining,
power production and gas, construction, and manufacturing.

Table 3.2.1: Descriptive Measures of the key variables
VARIABLES DEFINITION MEASURE
FO Proportion of A-shares held by
Foreign entity.
Total shares held by foreign
nationals based on the top 10
shareholders of the firm.
FO(DUMMY) Degree of foreign ownership in
categorical order from low to high
1%-15%= Low
15%-30% =Medium
30%- 100%= High
SIZE the actual profit made during the
Year(t) of business activity, after
deducting all costs.
Arithmetic mean= (Net
income_2015 + Net income_2016
+ Net income_2017 +Net
income_2018 + Net
income_2019)/5
AGE Number of years since its POI
Listing
Date
FIRM
PERFORMANCE
1
The return on Assets (RoA), it
measures profitability of the firm
over specific period.
RoA %
FIRM
PERFORMANCE
2
Tobin’s q is the ratio between the
market value and replacement
value of the same physical asset
Tobin’s Q ratio
Table 3.2.2: Descriptive Statistics

Table 3.2.2 Provides descriptive statistics of the independent (Level of foreign ownership),
explanatory variables (RoA and Tobin’s Q ration) and controlling variables (IPO date, and
Net profit).According to (FTSE Russell,2019) report China limited the amounts of A-shares(
listed stocks in Shanghai and Shenzhen) held by non-domestic stockholders to 30%.In this
sample the mean of Foreign ownership is 21.26% that is in line with praise studies of this
nature as (Nakona and Nguen,2013; Nguen et all.,2020;0). The age of the listed firms in this
sample is10 years old. Since 2008-2009 stock market crash there was not any huge
systematic risk that could have affected my sample therefore on average my sample is able to
reliably predict the impact of foreign ownership on performance.
3.3 Direct Effect of Foreign Ownership on Firm Performance
Heterogeneity and unknown nature of shareholder utilization function on firm performance,
makes it very difficult to assess the real goal of an MNC. To examine the impact of foreign
ownership majority of the researchers adopted the financial theory of wealth maximization
and used Return on asset and Tobin’s Q ratio as overall performance measurements
(Belghitar, Clark and Kassimotis, 2018). Empirical models mentioned in this section were
used to assess the direct impact of foreign ownership on firm performance as well the shape
and the direction of the relationship such as (linear, Nonlinear) and (positive or negative).
Considering the endogeneity between foreign institutional holdings and firm value, the
researchers used three-stage-least-squares regression(3SLS), the results showed that shares
values is positively correlated with foreign ownership together with free float foreign shares
and institutional holdings, but it negatively correlated with the book to market and RoE
(Mishra,2014). Similarly, Wei et al. (2005) used the same model(3SLS) on Chinese stocks.
They found that state-ownership is not impacted by the performance, nor the institutional
ownership is affected by the Q ratio. In line with many similar studies of this nature we are
using ROA and Tobin’s q (also known as the Q ration). RoA is defined as the operating
earnings before interest, depreciation over the book value of total assets. The Q ratio is the
sum of the market value of equity and the book value of equity over the book.(Liu et
al.,2001) assessed Performance with labour productivity in China’s electricity industry and
found that firm with multinational shareholders are attributed with greater labour
productivity. Multinational firms regardless of their shareholders structure perform better
than domestic competitors. From managerial point of view the internal capabilities (Employ
productivity, financial strength) offirms are the main drivers for their internationalization as

these capabilities attracts more shareholders ‘Cherry Picking’ (Griffith, Reddings and
Simpson,2004). Has also been predicted with labour productivity, can also be predicted with
employment wage, Export level, R&D expenditure (Huang and Shiu,2009).
3.3.1 The Variables
3.3.1.1 The Dependent Variables
RoA and Tobin’s has been extensively used to assess the health and the profitability of
company regardless firm’s ownership structure (Chhibber and Majumber,1999; Liu et
al.,2001 Douma et all.,2006;Nguyen, Nakona,2020). Unlike other performance proxies, RoA
focus on the fundamentals of the business and examine firm’s internal capabilities in asset-
utilization or efficiency of the overall performance (Hagel, Brown, and Davison.2010). A
positive RoA indicates that of the total assets utilised in the company generate reasonable
profit. Conversely, when RoA is negative or low, it indicates that the company generates
losses from the use of its Assets. Therefore, if a company has a positive and it has great
potential to enhance growth and maximize value. But conversely, if the total assets used by
the company are not generating positive returns it will limit the growth of their own capital
(Alghifari, Triharjono andJuhaeni, 2013).
There are two main reasons why this research measures performance with RoA particularly
with this sample. First, RoA in a way avoids the potential distortions of real performance
created by financial strategists such as (growing debt, stock buybacks and leverages). Second,
in this data set the mean age of the listed firm in China is 2009 = 12 years from current date
and RoA become very critical for most of the firms over the long-term (Gallo,2016).
Adopting to RoA as measure of firm’s performance might results in shareholders and
managerial implications. Since RoA percentage significantly differs across different industry,
it might attract different types of foreigninvestors (short-term, long-term). Respectively, if
mangers decide to operate as ‘Asset-light’ by outsourcing heavy asset business activities RoA
might not fully reflect the performance of the firm.
In addition to RoA, Tobin's Q market-based measurement of performance also employed to
assess the impact of foreign shareholders (Demsetz and Villalonga,2001; Douma et al.,2006).
Q ratio was developed by Professor James Tobin (1967). Unlike RoA and RoE which are
backward approaches for current valuations, Tobin’s Q estimates futureperformance of the
financial markets on the value of the return on each dollar of incremental investment.Q ratio
is greater than one, indicating that investment in assets generates earnings which provide a

higher value than investment spending, this will encourage more foreign capital in the
market. On the other hand, If the ratio is smaller than one, it means the market is not
attractive. On the importance of Tobin’s Q measurement (Blundell et al.,1992) claims in his
research that Q ratio is essential to investor’s decisions but not significant for firms measure
of performance.
To have a robust assessment of the relationship of foreign holdings and performance, this
paper has adopted to both accounting method (RoA) andmarket-based measurement (Tobin’s
Q) this will not only provide a robust analysis, but it will also eliminates any inconsistencies
that might exist between these two approaches (Kyereboach-Coleman,2008).
3.3.1.2 Independent variables
According to ownership theories, firm performance is significantly impacted by its ownership
and control factors (Demsetz,2016). (Chhibber and Majumdar,1999) found that the level of
control and monitoring associated with foreign shareholders over domestic firms in India is
positively related to increase in value of the firm. Douma et al. (2006) described the nature of
relationship between foreign ownership and performance beyond the financial increment and
extend to managerial performance and technology collaboration in the domestic market. The
direct effect of foreign shareholders varies according to country and industries (Gu,Cao and
Wong,2019). In this paper structure of ownership is determined based on the top 10
shareholders as explained by (Demsets,2016) the interest of minor shareholders is usually
defined by the presence of few large shareholders. thus, the existent of top 10 foreign
shareholders can define the interest of minority shareholders as well.
3.3.1.3 control variables
Firm SIZE: The closes proxy for the firm size in this sample is the annual net income,
obtained from firm’s financial instatements. Theoretically according to Fama and French
(1992), size is inversely related to performance. Most previous researchers examined the
effect of size on performance in terms of control variable and found that firms with
largersizehave superior performance and thatis becouse largerfirms tends to enjoy higher
competitive power in the market (Nofal,2019; Gurbuz and Aybars,2010; Phung and
Le,2013).
Firm AGE: Age of the firm is calculated from the date of its IPO; Theoretically Firm age is
inversely related to performance. According to Organizational theory of Hannan and Freeman
(1984), organization overtime tends to develop codes and policies essential for the day-to-day

operation and managers’ behaviours shape in line with these codes of conducts, until the very
system became a barrier to new changes which is called ‘Organizational Rigidity’ effect
(Wealchli,20090). Few research in the past attempted to undertake age and performance and
found negative relationship (Wealchli,20090; Gunu and Adamade,2015). Contrarily, other
researcher found a positive relationship Among these two variables.
Selcuk (2016) studied the impact of age on performance in Turkish market. The researcher
found that Age and performance have a convex relationship which means older firmperform
better than younger firms in Turkey. Firms accumulate knowledge and experience over time,
that gives them an edge over new firm and better performance (Gurbuz and Aybarz,2010).
Considering the casualty, performance does not influence age while age impacts performance
though accumulation of knowledge, reputation, and ‘Organizational Rigidity’ (Holm and
Quatraro,2018).
3.3.1.4 dummy variables
The percentage of foreign ownership in a company may indicate the attractiveness of the firm
calculated by RoA and Tobin’s Q. The relationship between the level of foreign holdings and
Firms profitability is heterogeneous. Empirical literature has attempted to find the optimal
level of foreign ownership adopting to bounders and property right models in the hostcountry
(Bircan,2014). Chhibber and Majumdar (1999), categorise foreign holdings according to
property right company act (1956) and found that in India firms with greater than 50%
shareshave better performance than firms with lower shares. Conversely studies by
(Vinh,2014; Yavas and Erdogan,2016) in Vietnam and Turkey respectively found that firms
with lower foreign shares has better performance. In my sample, the dummy variables are
categories according to table 3.3.1.2
Table3.3.1.4.1 Categorisation of dummy variables
Table3.3.4.2 Frequency Distribution of dummy variables

3.4.1 Empirical Model
Following (Gurbuz and Aybars,2010) model, the first model will test the relationship
between foreign ownership and performance.
𝒀𝒊𝒕 =
𝒂𝟎 +
𝒂𝟏𝑭𝑶𝒊𝒕 +
𝜼𝒛𝒊𝒕 +
𝒅𝒊𝒕 +
𝒆𝒊𝒕
where I = 1…N and t = 1…7; 𝑌𝑖𝑡 is either ROA, or Tobin's Q; 𝐹𝑂𝑖𝑡 is the percentage of
foreign ownership; 𝑧𝑖𝑡 is the set of control variables (firm size, firm age); 𝑑𝑖𝑡 are the
dummies of foreign ownership level,𝑒𝑖𝑡stands for the random error term.

CHAPTER 4: DATA ANALYSIS
4.0Introduction
This chapter of the report studies the impact of foreign ownership within the local
firms of China where various statistical tools and techniques were applied to evaluate how a
firm’s performance and percentage of foreign ownership are associated with each other. In
other words, the evaluation with regards to how performance of local firms in China gets
affected due to the foreign ownership within it will be done in this chapter of the dissertation.
This chapter will begin with the formation of hypotheses, followed by the application of
various statistical tools such as correlation, ANOVA, regression analysis and coefficient of
determination (r - square), with the aim of studying the impact of foreign ownership on the
firm’s performance. Within this section, the impact of foreign percentage of ownership in
Chinese MNC’s performance was evaluated through forming two hypotheses where two
different performance indicators of a firm were taken into consideration. The first hypothesis
is based on the firm’s ROA and it is meant to determine whether there is any form of
association that prevails between the firm’s ROA and foreign based ownership. Similarly, the
second hypothesis uses the firm’s Tobin’s Q ratio as a performance indicator to ascertain
whether there is any association that exists between the firm’s Tobin’s Q ratio and its foreign
based ownership. Accordingly, the ANOVA test is used for testing these two hypotheses and
a decision is to be made regarding the acceptance and rejection of null or alternative
hypotheses which would result in an understanding of whether there is any impact of foreign
ownership within Chinese firms on their respective performances in terms of ROA and
Tobin’s Q ratio.
4.1 Statistical analysis
Statistical analysis can be defined as the examination of patterns or trends depicted by
quantitative data to investigate the existence of a relationship between different sets of data
and the impact of the datasets on one another. Through statistical analysis, it can also be
determined as to how different variables within the huge dataset are acting as independent or
dependent variables. It is necessary to apply one of the statistical techniques or tools such as
correlation analysis, regression equation tool or analysis, testing of hypotheses through
ANOVA test, t – test or z – test, etc. to carry out statistical analysis. This acts as a most
important tool while conducting research on data pertaining to the sample of the research
which in turn clarifies the nature of the larger population. The reporting, presentation and
inspection of data based on sample can be easily understood by looking at the descriptive

statistics obtained because of applying statistical analysis. In this dissertation, the statistical
tools such as correlation analysis, regression analysis, coefficient of determination or r–
squared and ANOVA tests are used in the data analysis; an attempt to study how foreign
ownership within Chinese firms are affecting their overall performance (in terms of the firm’s
ROA and Tobin’s Q ratio) for the period between 2015 and 2019.
4.2 Hypothetical framework
To this dissertation or to achieve the aim and objectives of conducting this research, two
hypotheses were formed to take decisions or to answer research questions. Hypotheses are
formed while conducting research and are in the form of statements indicating an expected
relationship among different variables. These statements are required to be testable, clear,
falsifiable, and specific. A hypothesis formed for a thesis or dissertation must meet all these
criteria. In addition, a hypothesis in a research, thesis or dissertation must also include null
and an alternative hypothesis for each different argument that the researcher aims to prove.
Null hypothesis is a statement that is framed against the relationship between the variables
where it states that there is no significant relationship between variables under consideration.
As against this, an alternative hypothesis is a statement framed in favor of variables’
relationship where it states that there is a significant relationship which exists between the
researched variables. As the standard theory predicts, state ownership has a negative impact
on the performance of companies in which the government invests, whereas the existence of
residential outside companies and potential shareholders as business owners has a positive
impact on corporate, regardless of country/regional differences. Additionally, researchers
discovered that executives' ownership has a positive effect on the success of their companies.
Here in this dissertation, there are two hypotheses formed for the purpose of
addressing the research problem. The first hypothesis is based on the understanding regarding
whether there is a statistical significance that lies between foreign ownership within a
Chinese firm and its performance. The following is the null and alternative hypothesis meant
for studying the impact of the independent variable (foreign ownership) on the dependent
variable (firm performance ROA).

4.2.1 Hypothesis 1:
H0: Null hypothesis: There is no statistical difference between foreign ownership and ROA
H1: Alternative hypothesis: There is a statistical difference between foreign ownership and
ROA
Here, the H0 is the null hypothesis which would be accepted if there would be no statistical
significance found between the Chinese firm’s performance and its foreign based ownership
and rejected with the acceptance of the alternative hypothesis (H1) where there will be
statistical significance found within the firm’s performance and the foreign owned stake
therein. The existence or non–existence of a statistical significance will be proved through the
application of various statistical measures.
4.2.2Data analysis through regression equation
In the following section of the data analysis chapter of this dissertation, the regression model
has been applied to the accounting data pertaining to five accounting periods, that is, 2015,
2016, 2017, 2018 and 2019 of Chinese firms that have some stake owned by foreigners in
terms of capital injection. The accounting data involves those parameters depicting their
financial performance and financial position as well during the five-year period from 2015 to
2019. Around 625 companies were taken as a sample to understand the impact of foreign
ownership on firms’ performance. The secondary data related to this study involves both
accounting and non-accounting data wherein the former include ROA and Tobin’s Q ratio
while the latter involves firms’ sizes and their respective age (calculated based on IPO listing
date till now). Therefore, within the regression equation as a forecasting tool for future
events, the firm’s performance (ROA and Tobin’s Q ratio) was taken as a dependent variable
while the size of the firm, its age and its foreign ownership are all taken as independent
variables.

Model Summary
Mode
l
R R
Square
Adjusted R
Square
Std. Error of
the Estimate
1 .034a .001 .000 6.14014
a. Predictors: (Constant), foreign ownership
(Table 4-1)
4.2.2.1 Interpretation of the results
With the application of the regression model in SPSS (meant for analyzing quantitative data)
on the quantitative accounting data pertaining to 625 Chinese firms having certain amount of
foreign stake in their capital, the output obtained gives us the value of R which is a symbol of
correlation and r–squared depicting the value of the coefficient of determination. The former
is the most important statistical tool for analyzing and understanding the relationship that
exists between the two variables under consideration; whether they are positively related or
negatively related along with the degree of this relationship, which can be high, moderate or
low. There will be a high degree of correlation among the variables when the value of R is
greater than + or - 0.50. The degree of correlation is medium when the value of R is between
+ or – 0.25 and + or – 0.50 and it is low if its value is less than + or - 0.25. r–squared, on the
other hand, is useful in understanding how the difference can be noticed in a dependent
variable (firm’s performance) due to differences taking place in an independent variable
(ROA).
As per the model summary of the regression table above, it has been identified that there is
significantly lower relationship between both variables. This is so because the value of R is
only 3% which falls under the 0 to 25 range based on which a lower relationship is identified.
However, the value of R square clearly entails that there is only a 0.01% variation identified
over ROA when the foreign ownership of all the selected companies changes. Thus, it has
been analyzed from the adjusted R square that if a company introduces more useless
variables, then the value of the same decreases. Therefore, it can be stated that with the
change in the value of foreign ownership, there is a direct impact over the results, i.e., the
ROA but with only minute changes.
The reason behind positive relationship existing between a firm’s performance and its foreign
ownership is the inflow of foreign direct investment within a developed nation like China,

making it a significant source of finance due to the resulting increase in international capital
flows within China. This in turn leads to an effect on the firm’s performance, leading to
gained attention at the economic level. So, both the coefficient of correlation and the
coefficient of determination are the best measures to fulfill the very purpose of this study
which aims to evaluate the impact of foreign ownership on 625 Chinese firms publicly traded
on the Shanghai Stock Exchange & Shenzhen Stock Exchange over the period of 5 years
from 2015 to 2019. The positive 3% correlation between foreign ownership and firm
performance indicates that there must be a minor, if not, great significant difference found in
a Chinese firm’s performance due to the involvement of foreign investment in it.
4.2.2.2 Analysis of Variance
ANOVA is another very important technique that is being used in research to analyze data
pertaining to research samples, but the data must be quantitative in nature. Here, with
reference to the quantitative secondary data in terms of financial information pertaining to
625 Chinese firms for the period between 2015 and 2019, the analysis will be done through
the application of the ANOVA test which is used to compare means of two groups or
variables to check and understand the relationship between the sample variables along with
determining whether it is significant or not. So, to determine the level of relational
significance among the variables under study, the p value is judged, which is obtained with
the application of ANOVA test at certain confidence level. Like the example below, the
ANOVA test was applied at 95% confidence level leading to the following results:
ANOVAa
Model Sum of Squares df Mean Square F Sig.
1 Regression 26.845 1 26.845 .712 .399b
Residual 23487.945 623 37.701
Total 23514.790 624
a. Dependent Variable: ROA
b. Predictors: (Constant), foreign ownership
(Table 4-2)

In the above table obtained post application of ANOVA, the value of F is 0.712 indicating the
ratio of mean square values of foreign ownership and the firm’s performance in terms of
ROA. If the resulting value of F is closer to one, then this indicates the null hypothesis must
be accepted by rejecting the alternative one because a larger value of F means there is a huge
variation among the mean square values of two variables which means, foreign ownership
and the firm’s ROA are expected to have occurred by chance indicating that no statistical
significance exists between the studied variables. The value of F can be calculated by
dividing the two mean square values given in the table above, that is, 26.845 / 37.701. The
resulting value of F is thus equals to 0.712.
Coefficientsa
Model
Unstandardized Coefficients
Standardized
Coefficients
t Sig.B Std. Error Beta
1 (Constant) 5.367 .361 14.870 .000
foreign ownership .010 .012 .034 .844 .399
a. Dependent Variable: ROA
(Table 4-3)
4.2.2.3 Interpretation of the Coefficient
Accordingly, with the help of the above output, it has been identified that there is no
significant difference between the mean value of ROA and the company’s foreign ownership.
Also, it is so because the value of p is 0.3 which is greater than the standard criterion of 0.05.
This in turn reflects that the null hypothesis is accepted over the other. Hence, it has been
identified that there is no change identified over the Return of Assets when the foreign
ownership of a company changes.
From the above table, the following regression equation could be formed by combining the
constant value and slope value acting as a change in the independent variable (foreign
ownership) to determine or predict the firm’s performance in terms of ROA which is a
dependent variable.
Regression equation, Y = a + bx

a = 5.367
b = 0.010
where, Y is a dependent variable (firm’s performance or ROA) on x which is an independent
variable (foreign ownership). Also, a is an intercept or constant value while b is the slope of
the regression line indicating the change in independent variable (foreign ownership). The
regression equation to predict the firm’s performance (ROA) based on foreign ownership
which is an independent variable is as follows:
Y (Firm’s performance or ROA) = 5.367 + 0.010 * (foreign ownership)
Through this regression equation, it can be interpreted that a 1% change in foreign ownership
would give rise to a higher Return on Assets of the Chinese firm by 0.010%.
Apart from this, the coefficient table also entails that there is a positive sign and this in turn
shows that the value of the independent variable increases with the mean of the dependent
variable that also tend to increase. As a result, the p value in the table shows that when the
foreign ownership of a company increases, there is a slight increase in ROA within all
selected firms. Overall, the results indicated that with the change in overall performance of a
company in terms of foreign ownership, there is no direct impact identified over the results of
ROA. Hence, null hypothesis is accepted regardless to alternative so that it entails there if 5%
change identified over foreign ownership, then it might affect the ROA of a company but
does not entirely affect and this in turn causes impact over profitability of a company, so
effective methods need to be adopted for the same.

4.3 Hypothesis 2
The second hypothesis formed is to prove whether there is any statistical significance that
exists between foreign stakes within the 625 Chinese firms listed on the Shanghai Stock
Exchange and Shenzhen Stock Exchange and their respective performance for the period
between 2015 and 2019. This hypothesis is different from the first one because a different
performance measure is used here, the Tobin’s Q ratio, which is the ratio of market
capitalization of a firm to its total assets during a specified period; in this case, five years.
The ratio is helpful in determining whether the business is overvalued or undervalued. In
other words, Tobin’s Q ratio is the expression of the relationship between a firm’s intrinsic
value and its market value. With respect to studying the statistical significance between the
two variables, that is, the firm’s Tobin Q ratio and its foreign ownership, the following null
and alternative hypotheses are formed.
H0: Null hypothesis: There is no statistical difference between the mean value of all foreign
ownership and Tobin q ratio.
H1: Alternative hypothesis: There is a statistical difference between the mean value of all
foreign ownership and Tobin q ratio.
Analysis of relationship between a firm’s Tobin Q ratio and its foreign ownership through
regression model
Model Summary
Model R R Square Adjusted R Square Std. Error of the Estimate
1 .080a .006 .005 5.21485
a. Predictors: (Constant), foreign ownership
(Table 4.3-1)

4.3.1 Interpretation of the results
The value of R in the above Model Summary indicates the degree of correlation between
foreign ownership and a firm’s performance measured through Tobin’s Q ratio. On the other
hand, the value of R Square is a symbol of coefficient of determination which indicates how
much variation in the firm’s Tobin Q ratio (dependent variable) which can be determined
through the variation taking place in the foreign ownership (independent variable).
In accordance with the regression’s model summary, it has been identified that there is minor
or very low relationship between all the selected variables because the value of R Square falls
under the range of 0 to 25. Thus, it can be stated that with a change in the independent
variable, it causes minor change over others. On the other side, it reflects that the value of R
Square clearly indicates that there is only a 0.06% change over the dependent variable. It
means that when the value of foreign ownership changes, the ratio of Tobin Q will only be
affected marginally.
Apart from this, the Adjusted R Square value also shows that when the value of the
independent variable is changed, the mean of the dependent variable increases or decreases. It
is so because there is a slight change over the results. Whilst the Standard Error of Estimate
value clearly reflects that there is a smaller Standard Error of Mean within a value and this
shows that the data has a moderate Standard of Error because it highly spreads the value as
compared to means of an entire data.
4.3.2 Analysis of Variance
In this section, the secondary accounting data pertaining to the 625 Chinese firms
have been analyzed by applying ANOVA test to understand whether there is any kind of
statistical relationship existing between foreign ownership and a firm’s Tobin Q Ratio which
is used as a measure of performance.
ANOVAa
Model Sum of Squares df Mean Square F Sig.
1 Regression 109.484 1 109.484 4.026 .045b

Residual 16942.245 623 27.195
Total 17051.730 624
a. Dependent Variable: Tobin's Q
b. Predictors: (Constant), foreign ownership
The above table gives the value of F higher than one F value which indicates that there is a
major variation within the means of sample in relation to the variation existing within the
sample. The value of F here is obtained by taking the ratio of mean square in the table above
(109.484 / 27.195 = 4.026). It must be noted that the value of F gives us the lower value of p
and based on these values only, the decision regarding the acceptance and rejection of null
and alternative hypotheses are taken. Here as the value of F is much higher leading to lower p
value below the level of significance, that is 0.05 or 5%, the null hypothesis will be rejected,
and the alternative hypothesis will be accepted. Both the higher F value and the lower p value
indicate the statistical significance lying among the variables.
Coefficientsa
Model Unstandardized
Coefficients
Standardized Coefficients t Sig.
B Std. Error Beta
1 (Constant) 2.787 .307 9.09
3
.000
foreign ownership .021 .011 .080 2.00
6
.045
a. Dependent Variable: Tobin's Q
4.3.4 Interpretation
It has been interpreted from the regression output table that the value of significance is 0.04
which is also greater than 0.05. This entails that the alternative hypothesis is accepted over
the null hypothesis and that is why, it shows there will be a direct impact over Tobin’s Q
Ratio when the foreign ownership has changes. It also reflects that the company’s
performance does change over the result when the ownership changes. Thus, it can be stated
from the coefficient table that the size and direction of a relationship between the predictor
and the response variables. That is why, there are small changes identified over the result
because of the minor and lower relationship between the variables. In the present case,

acceptance of the alternative hypothesis over the null hypothesis indicates that there is a
statistical significance that lies between foreign ownership and a firm’s performance (Tobin’s
Q Ratio).
Based on the above table depicting the regression output, the following regression equation
can be formed to predict the value of the dependent variable (firm’s Tobin’s Q Ratio) based
on the independent variable (foreign ownership).
Y = a + bx
Y (Predictor) = dependent variable or firm’s Tobin q ratio
a = intercept of the regression line = 2.787
b = slope of the regression line indicating the change in an independent variable = 0.021
x = independent variable or foreign ownership
Y (Firm’s Tobin’s Q Ratio) = 2.787 + 0.021 (foreign ownership)
Through this equation, it can be interpreted that a 1% increase in foreign ownership would
lead to a 0.021% change in a firm’s Tobin’s Q Ratio.
Therefore, it can be stated that with the change of the overall performance of the
selected companies then it might affect the whole performance of a company, though there is
a significant relationship between the variables, but minor changes have been identified over
the performance of a company. Overall, it can be stated that with the ownership of a business
will be changes, there is a difference identified over the market value over an asset. Hence, it
has affected the overall performance of a company in an adverse manner.
Conclusion
As per the results generated, it has been identified that all the foreign corporate
shareholders want to invest within a business, and they do not identify the best way. Or
sometimes, they do not always become financially motivated to become more competitive.
That is why, the results from the hypothesis also reflected that there must be a direct
relationship between Tobin’s Q Ratio and the company’s ownership. This is also supported
by Alabdullah, Ahmed and Yahya (2018). Tobin’s Q mainly depends upon current and future
expected benefits of the invested capital within a company and that is why, there should be a
positive relationship shared between both variables. Also, it can be stated that with the
change in the overall performance of a company, there is a direct impact identified over a

business’ performance because capital investment is also affected. However, through
secondary sources, it has been identified that a foreign corporate is less fragmented as
compared to the stake holding, whereas it is aligned to perform in an effective monitoring
function. Overall, it has been realized that with the positive relationship between both
variables, i.e., Tobin’s Q Ratio and foreign ownership. Thus, the study determines different
companies and that is why, the foreign ownership is related with the same as it also changes
with the change identified in the ratio section.
About ROA, it has been analyzed that 627 companies are selected by the scholar and
there is no relationship identified between a company’s ROA and foreign ownership. This is
since foreign management does not necessarily make investors encouraged to participate
within the company’s management to better manage the business. This in turn causes an
increase to the training cost and other spending which further contribute to reduce the
profitability of a business. This is also reflected under the secondary research by Bagais and
Aljaaidi (2020) that FDI declares the annual losses due to transfer pricing number of FDI
firms to make profit, but this reduces the profitability of the company. That is why, the
collected data set also reflected that there is a need to control and adjust the financial
performance of a company so that effective outcome can be generated. Also, Bennouri and
et.al., (2018) critically evaluated that if a firm may invest into expanding its size, then there is
a need to manage or increase its fixed assets which assists to increase the productivity of a
company as well. Thus, the bigger the size of a firm, it will help to analyze the higher results
and this in turn also raises the ROA of the company so that profitability might be contributed.

CHAPTER – 5 DISCUSSION ON THE FINDINGS
5.0 Impact of Foreign ownership on Chinese listed firms
From the literature review, it has been identified that there are many complexities identified
over the business of a company and due to low foreign ownership within the company, it has
a negative or adverse impact over the business. As a result, it can be stated that to develop a
relationship between variables, there is a need to focus on different assets so that the best
outcome can be generated, and which leads to the provision of a better relationship between
variables. Koji, Adhikary and Tram (2020) also shared their views and stated that there are
different ownership transaction advantages which help to set the best outcome and also set up
an activity which influence the competitiveness of an individual company in order to be
strong against competition. That is why, the relationship between both variables is not proved
under the regression equation. Also, there is a need to focus on the issue and interact with full
strategic choices of all companies so that the best outcome can be generated. Under the
literature review, the resource-based theory also entails that a company needs all the essential
resources to make effective competition in a market. Thus, having strong assets within a
business will help it to perform well and this in turn will bring about a better outcome as well.
In addition, having a low output in ROA leads to poor performance of a company where the
hypothesis also does not prove. So, a firm has a direct influence over the business
performance and most of the small firms also need to determine the importance of assets so
that an effective outcome can be generated.
Furthermore, it has been identified that firms with a higher foreign ownership against those
having lower or no financing from international investors generally face difficulties in getting
sufficient finance for their growth and development. However, it is found that minority
ownership of foreigners is better than majority ownership in terms of better operating
profitability of the firm.
5.1 Positive relationship(U-shape)
U–Shaped curve is obtained for foreign ownership and firm performance which indicates
there is a positive relationship between these two variables to some extent and after that, there
is a decline in the firm’s performance. The reason of the positive relationship is that foreign
shareholders carried out monitoring role in a significant manner leading to lower agency
costs (Rashid, 2020). Also, the slight improvement in foreign firm’s performance can be due

to the advantage enjoyed by them of better management and advanced technologies brought
from abroad. If such foreign ownership is held by foreign board members, it leads to an
independent control and monitoring imposed over the shareholders along with the increase in
total firm value which is a component of Tobin’s Q Ratio (Nofal, 2020). Accordingly, it can
be said that Tobin’s Q Ratio shows positive relationship with foreign ownership, however, no
significant impact of foreign ownership has been found over the firm’s performance if seen
through its ROA which means foreign investors have no differentiative contribution towards
the firm’s profitability.
It has been found, in support of the slight relationship between the foreign ownership and the
firm’s performance in terms of ROA, that the firm’s performance is directly associated with
the commitment of advanced technologies and productive resources to the domestic firms of
China by the foreign stakeholders (or foreign firms) (NGUYEN and et.al., 2020). At this
point, it can be said that the firm’s ROA, as a performance measure, is improved with the
utilization of foreign resources and technologies. Thus, the positive relationship can be seen
among foreign ownership and the firm’s ROA.
Alternatively, with respect to studying the relationship between a firm’s performance
in terms of their Tobin’s Q Ratio and foreign ownership, it was found that there exists a
curvilinear relationship between the firm’s value and the proportion of equity ownership held
by foreign investors. Accordingly, it was evidenced from the data analysis above where the
alternative hypothesis gets accepted in the case of Chinese firms having some percentage of
their equity shares held by foreign investors (Adamu and Haruna, 2020). The acceptance of
the alternative hypothesis indicates that with the increase in foreign ownership, there will be
an increase in the firm’s value which results in a higher Tobin’s Q Ratio for the firm, which
was taken as a measure of performance.
Last but not the least, it could be said that a higher firm performance can be seen if
the Tobin’s Q Ratio is taken against the ROA of the firm as a performance measure to test the
significance and role of foreign ownership in the overall improvement and growth of Chinese
firms (Tran, 2020). However, this is only true if the resource-based theory gets satisfied while
implementing foreign ownership within the domestic firms of China in an appropriate
manner.

CHAPTER 6: CONCLUSION AND RECOMMENDATIONS
6.0 Conclusion
Summing up the above report with the changing era, FDI and PI have brought a lot of
transformation within a company and that is why, China has become one of the most
attractive destinations for foreign investments. Similarly, the present literature review also
reflects that to meet customers’ requirements and expectations, organizations are keen to
create and gain access to ownership-specific advantages in foreign locations. With the overall
secondary study, it can be summarized that there is a linear relationship identified between
firm ownership and performance. It is so because in the measurement of performance based
on financial data, Tobin’s Q Ratio has been identified which reflects the linear relationship.
On the contrary, it has been evaluated that there is an inverse relationship identified over the
results and this in turn shows that shareholders might be affected. Also, there is no or mix
relationship shown between the foreign ownership and company performance which is also
supported by the case of the performance of domestic firms and MNCs in Portugal where the
same is identified.
On the other hand, it has also been evaluated that a firm’s performance from this
context varies from a shareholder in a different region. Thus, the profitability of the firm is
also dependent on whether the shareholders share the amount by foreign notion which affect
the company’s profitability. Besides, through the third chapter, it has been identified that with
the help of quantitative study, the hypothesis can be proved by applying a deductive
approach. In this, scholars are able to meet the defined aim of the study so that effective
outcome can be generated, and the research aim as well as objectives can be attained. This in
turn shows that to evaluate the firm performance, there is a need to use quantitative data so
that an effective outcome can be derived. Also, to prove the hypothesis, 627 firms with
foreign shareholders were selected out of a total of 2,727 financial as well as non-financial
firms. Under the selected data, all the variables are chosen which in turn clearly points to an
answer and meet the research question as well.
Through the data analysis section, it can be concluded from descriptive statistics that
the mean of foreign ownership of the selected sample is 21.26% and the age defined under all
selected firms is 10 years from the listed items and it might vary from 2,000 as well. Also, by
using Regression Analysis, it has been identified that there is no difference between the
variables and this in turn does not change the value over dependent variables. As such, the

result also entails that the value of significance level is higher than 0.05 and that is why, the
null hypothesis is accepted over the alternative. This suggests that there is no difference
between the firm ownership and the ROA as well, but there is however, a direct change
identified over Tobin’s Q Ratio, as the alternative hypothesis is accepted. Hence, it has been
identified that there is no change identified over the dependent variable because of low
association between the variables. Hence, overall, the study reveals that there might be a
positive, negative or no relationship between all the variables. Thus, MNC firms as well as
their shareholder structures perform best from domestic competitors. That is why, there is a
need to identify further, better variables that mainly contribute their best towards a study so
that it will generate a better outcome.
6.1 Implication of the study
The present study and its findings are important for companies which are selected for
the study because they collect the information and then make decisions accordingly. As per
the result, it has been identified that there is no impact identified over the independent
variable because changes in ROA and Tobin’s Q Ratio does not affect the result of a
company’s foreign ownership. So, it has been identified that this information assists to make
decision so that an effective outcome can be generated. On the other side, another implication
of this study is that it will help those countries apart from China to make decision by
evaluating the decision.
In addition, the present study might help other researchers who want to study this
topic because it will help them understand the terms and use the sources as a secondary study
as well. Also, the present research is also important for the practice and theory because it
assist in making decisions accordingly and analyses which theory will be more beneficial and
determine the exact answer for the same.
6.2 Limitations and strength
For the present study, the strength is the use of software to evaluate data and this in
turn causes positive impacts over the result. It is so because the result evaluated from the
study will provide an accurate outcome, though it has been identified that there is no
difference between the variables. However, on the critically note, it has been identified that
the data is extracted from the secondary source and that is why, it might lead to make
variations in a decision. Further, it can be added that specific sectors need to be selected in
which companies’ performance can be analyzed so that an effective outcome can be
generated. Hence, it will analyze the data in a more effectual manner as compared to others.

On the other hand, it has also been evaluated that unavailability of the sources is also
considered as a limitation because there are many websites which deny access and this in turn
causes a direct impact over the result because it consumes time.
Thus, to minimize such an issue, there is a need to use keywords which in turn help to
evaluate the articles and extract the information according to the chosen topic. So, it will help
to minimize the negative impact over results and with the help of quantitative data, the results
might help to overcome such an issue, and this affect the result in a positive manner as well.
6.3 Recommendations
From the entire findings it has been evaluated that there is no relationship and
association between dependent and independent variables. Thus, there is a need to improve
the performance of a company and for that, a few suggestions are as mentioned below:
 It is suggested that both qualitative and quantitative research methods be used in near
future which help to derive better results and meet the same. Also, it will further assist
to create a better outcome and analyze results in terms of qualitative and quantitative
manner. In future adopting this methodology will assist in providing a better view and
generate the best outcome as well.
 Further, it is also recommended that to quantify the level of risk within a company,
the entire risk needs to be ascertained so that an effective outcome can be generated.
In this, an external environment needs to be reviewed so that the effective outcome
can be generated. Also, it helps to meet the defined aim of a company so that an
effective outcome can be generated (Nguyen and Nguyen, 2020). In the present study,
data is selected but the company might not evaluate the risk of a country, and this
affect the evaluation of a result. That is why, it needs to be taken.
 Also, it is suggested that more variables within the research be included because this
helps to provide effective outcomes and might assist in determining the relationship
between both variables in an effective manner. This might include the variables like
expenses and other investments made by the company so that effective outcomes can
be generated. This in turn also helps to elaborate the findings in a more effective
manner so that better outcomes can be generated. This needs to be included when the
same study is performed soon which derives best outcomes and company make
effective decision as well.

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