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

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...

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Main Authors: Zainudin, Rozaimah, Mahdzan, Nurul Shahnaz, Nor Mohamad, Norzulkarnien
Format: Article
Published: Emerald Group Publishing Ltd 2021
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Online Access:http://eprints.um.edu.my/25886/
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spelling my.um.eprints.258862022-05-13T10:18:51Z http://eprints.um.edu.my/25886/ Internationalisation and financial performance: In the case of global automotive firms Zainudin, Rozaimah Mahdzan, Nurul Shahnaz Nor Mohamad, Norzulkarnien HG Finance 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. Emerald Group Publishing Ltd 2021 Article PeerReviewed 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, DOI https://doi.org/10.1108/RIBS-04-2020-0039 <https://doi.org/10.1108/RIBS-04-2020-0039>. 10.1108/RIBS-04-2020-0039
institution Universiti Malaya
building UM Library
collection Institutional Repository
continent Asia
country Malaysia
content_provider Universiti Malaya
content_source UM Research Repository
url_provider http://eprints.um.edu.my/
topic HG Finance
spellingShingle HG Finance
Zainudin, Rozaimah
Mahdzan, Nurul Shahnaz
Nor Mohamad, Norzulkarnien
Internationalisation and financial performance: In the case of global automotive firms
description 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.
format Article
author Zainudin, Rozaimah
Mahdzan, Nurul Shahnaz
Nor Mohamad, Norzulkarnien
author_facet Zainudin, Rozaimah
Mahdzan, Nurul Shahnaz
Nor Mohamad, Norzulkarnien
author_sort Zainudin, Rozaimah
title Internationalisation and financial performance: In the case of global automotive firms
title_short Internationalisation and financial performance: In the case of global automotive firms
title_full Internationalisation and financial performance: In the case of global automotive firms
title_fullStr Internationalisation and financial performance: In the case of global automotive firms
title_full_unstemmed Internationalisation and financial performance: In the case of global automotive firms
title_sort internationalisation and financial performance: in the case of global automotive firms
publisher Emerald Group Publishing Ltd
publishDate 2021
url http://eprints.um.edu.my/25886/
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score 13.211869