The Relationship between Foreign Ownership and Firm Performance in India:An Empirical Analysis

Abstract

The paper examines the impact of foreign ownership (foreign promoter, foreign corporate shareholding and foreign institutional investors) on firm performance. The empirical analysis is done on the panel data of 145 non-financial NSE listed companies for a period of five years, i.e., from 2008-2012. Firm performance has been measured using market based measure Tobin’s Q and accounting based measures Return on Assets (ROA) and Return on Equity (ROE). Multiple regression analysis is done using Pooled OLS and Panel Data-Random Effect Model. Foreign ownership is found to have a positive and significant impact on firm performance measures under Pooled OLS model, but the impact is found only positive in Random Effect Regression. The relationship between foreign corporate ownership and firm performance is positive and significant at varying level of significance. Foreign institutional ownership is found to have an ambiguous relationship with different firm performance measures used.