Does location matters in determining firms’ performance? a comparative analysis of domestic and multinational companies
Abstract
Purpose--The objective of this research is to investigate the impact of internationalization of investment on corporate policies through multinational firms and thereby variation in financial performances when compared to domestic firms using 10 years (2004-2013) secondary data of 153 firms listed on Pakistan Stock Exchange.
Design/methodology/approach - This study applies regression and ratio analyses for testing of hypotheses and other statistics.
Findings--The results indicate that the performance of multinational firms is better than domestic firms primarily because of internationalization of investments and inventory utilization. The rest of the factors included in the model namely cash conversion cycle and corporate governance indices have less prominent role in determining firms’ performance.
Research limitations/implications - Sample size was restricted to 153 firms as complete data for the period selected to carry out the study were available only for these firms. For determining the quality of corporate governance, only sample average has been used as bench mark due to non availability of industrial average.
Practical implications--The recommendations of the research can be used by economic planners and corporate experts as policy guidelines and bench mark for improving the corporate and economic performance of the country. Besides, these recommendations are beneficial for emerging economies particularly and developed economies generally across the globe.
Originality/value--Splitting the sample into domestic and multinationals firms, separately and jointly analyzing these firms and then comparing corporate strategies of these firms based on location is unique.
Keywords--Corporate Governance, Firms’ Performance, Location, Multinational Firms, Working Capital Policy
Paper type—Research paper
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