At present, the uncertainty of enterprises operating in multinational business is becoming more and more serious, and there is an urgent need to take effective measures to cope with it. Common ownership, as an emerging ownership structure in the capital market, is being hotly discussed by academics. In this paper, we seek to verify whether common ownership can alleviate enterprises’ multinational business uncertainty.
Leveraging data on Chinese-listed firms, we adopted fixed-effects regression and a series of endogeneity tests to explore the association between common ownership and multinational business uncertainty.
This paper finds that common ownership can help reduce multinational business uncertainty. Besides, more linkages between them and larger shareholdings of common ownership amplify this reducing effect of common ownership on multinational business uncertainty. Furthermore, we find that common ownership reduces multinational business uncertainty by increasing resource deployment flexibility, reducing information asymmetry and improving internal control effectiveness. Heterogeneity analyses show that this reducing effect is more pronounced among non-state-owned enterprises and firms which stay at the growth and maturity stage.
Drawing on the resource dependence theory, the major contribution of the paper is that we find the unique function of common ownership on reducing multinational business uncertainty and to explore the possible mechanisms of its impact for the first time. Besides, this paper may help multinational enterprises better respond to the challenges of multinational business uncertainty and the implementation of internationalization strategies.
