Institutional determinants of domestic and foreign subsidiaries' performance

Gugler, Klaus and Mueller, Dennis C. and Peev, Evgeni and Segalla, Esther (2013) Institutional determinants of domestic and foreign subsidiaries' performance. International Review of Law and Economics, 34. pp. 88-96. ISSN 0144-8188


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This article investigates the determinants of subsidiaries' profitability using a unique dataset of more than 23,000 listed and unlisted subsidiaries worldwide over the period 1994-2005. We find that profitable parent companies are able to transfer some of the intangible assets that make them profitable to their subsidiaries. Our results indicate that good institutions (measured by the Worldwide Governance Indicators) are associated with better performance for companies' subsidiaries. When we categorize countries in terms of the origins of their legal systems, we also find that this dimension of institutional quality is generally associated with better performance. Controlling for both legal origins and country governance institutions, we find that both sets of institutions are significantly related to subsidiaries' performance, and that there is an overlap in their explanatory power. (authors' abstract)

Item Type: Article
Additional Information: To see the final version of this paper please visit the publisher's website: Access to the published version may require a subscription.
Keywords: subsidiary performance / institutional quality / origins of legal systems / transfer of corporate governance
Classification Codes: JEL G30, P48, K0
Divisions: Departments > Sozioökonomie > Sozialpolitik > Quantitative VWL
Version of the Document: Accepted for Publication
Variance from Published Version: Minor
Depositing User: ePub Administrator
Date Deposited: 08 Apr 2013 10:55
Last Modified: 26 Jun 2015 21:43
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