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CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology KTH/CESIS Working Paper Series in Economics and Institutions of Innovation

No 311:
Foreign Investors as Change Agents: The Swedish Firm Experience

Kathy S. Fogel (), Kevin K. Lee (), Wayne Y. Lee () and Johanna Palmberg ()

Abstract: Institutional theory suggests that informal institutions effectively constrain human behavior. Culturally embedded norms and values align corporate governance with socially acceptable outcomes. We argue that active foreign investors can act as agents of change in corporate governance. Investigating changes in ownership and control of Swedish firms, we find that active foreign investors’ participation in conjunction with a reduction of control by the largest domestic shareholder, improves firm performance through more efficient capital utilization and labor productivity. Firms move away from a Swedish stakeholder orientation toward an Anglo-American shareholder wealth maximization focus.

Keywords: Foreign Direct Investors; Informal Institution; Business Culture; (follow links to similar papers)

JEL-Codes: E02; G32; G34; G38; M14; (follow links to similar papers)

44 pages, May 24, 2013

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