Foreign equity configurations in an emerging country: Implications for performance

SummaryThe aim of this study is to compare and contrast the control characteristics and performance implications of different levels of foreign equity involvement in an emerging country. It is proposed that foreign investors’ assessment of behavioral and contextual uncertainties in the host environment shape these configurations. Different levels of foreign involvement are represented in three foreign ownership configurations, namely foreign majority, shared equity, and foreign minority. Data consists of 164 firm-year observations for the period 1999–2002 at the Istanbul Stock Exchange. We provide evidence on the presence of distinct configurations which vary in their ability to meet the requirements of the institutional context. Among these, the shared equity configuration is found to display superior performance, by virtue of responding both to the efficiency concerns of transaction cost theory and the legitimacy focus of institutional theory.