Internationalisation and financial performance: in the case of global automotive firms

Zainudin, Rozaimah and Mahdzan, Nurul Shahnaz and Nor Mohamad, Norzulkarnien (2021) Internationalisation and financial performance: in the case of global automotive firms. Review of International Business and Strategy, 31 (1). pp. 80-102. ISSN 2059-6014

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Official URL: https://doi.org/10.1108/RIBS-04-2020-0039

Abstract

Purpose: Given the mixed evidence on the relationship between internationalisation and firm performance, the purpose of this study is to investigate the effect of internationalisation on the financial performance in the setting of a matured and stagnant market, the global automotive industry. Design/methodology/approach: The study uses 37 automotive manufacturers covering from 2000 to 2015. Panel regression analyses were used to estimate the relationship between four financial performance variables (return on equity [ROE], return on asset [ROA], return on capital [ROC] and return on sales [ROS]) and three main independent variables (foreign assets to total assets [FATA], research and development intensity [RNDi], advertising intensity [ADVi]), controlling for product diversification, firm size, age and risk. Findings: The findings reveal that automotive firms with a lower FATA ratio, lower RNDi and higher ADVi tend to achieve higher financial performance. However, the intensity of product diversification does not influence the financial performance of global automakers. Ceteris paribus, larger firms in terms of market capitalisation and new entrants into the market tend to have higher financial performance relative to smaller and older firms. Originality/value: This study contributes to the literature first by examining the relationship between internationalisation and firm performance in the setting of a matured market, i.e. the automotive industry. Secondly, the paper uses a multinational sample at a global level; and third, it analyses financial performance on a comprehensive basis via four measures, namely, ROA, ROE, ROC and ROS, as the dependent variables. © 2020, Emerald Publishing Limited.

Item Type: Article
Uncontrolled Keywords: Automotive firms; Financial performance; Internationalization; Multinational companies
Subjects: H Social Sciences > HG Finance
Divisions: Faculty of Business and Accountancy > Dept of Finance and Banking
Depositing User: Ms. Juhaida Abd Rahim
Date Deposited: 28 Apr 2021 00:49
Last Modified: 28 Apr 2021 00:49
URI: http://eprints.um.edu.my/id/eprint/25886

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