*2.4. Foreign Ownership and Firm Performance*

Many studies have been conducted to examine the relationship between foreign ownership and the firms' profitability. Firms with foreign ownerships are found to have better ROA than firms with higher domestic ownerships in Turkey (Aydin et al. 2007). A positive relationship between foreign ownership and profitability is also observed in a study of Tunisian firms (Moez et al. 2015). Likewise, a study on 663 non-financial listed firms on the Korea Stock Exchange from 2001 to 2017 revealed that foreign ownership enhances firms' long-term growth rate, thus increasing firm value, indexed by Tobin's Q (Choi and Park 2019). Moreover, foreign ownership can reduce agency costs because foreigners can use their expertise in monitoring management, thereby improving firms' profitability (Choi and Park 2019).

As for Japanese firms, Fukuda et al. (2018) found a positive relationship between foreign shareholding and Tobin's Q. Although Sueyoshi et al. (2010) found a similar result, they note that the influence of foreign shareholding on firm performance diminishes when the ratio of foreign shareholders increases to 19.49%. Yoshikawa and Rasheed (2010) considered the interaction effect of foreign ownership and ROE for the OTC market listed Japanese firms in the manufacturing industry and revealed that foreign investors influence family owners to improve firm performance. Hideaki et al. (2015) unearthed a significant positive association between foreign shareholding and Tobin's Q for Japanese firms even after controlling the effect of various factors that may affect firm performance. By contrast, Kojima et al. (2017) found a negative relationship between foreign shareholdings and earnings quality.

We note that foreign investors can improve the performance of family firms in the following ways. First, foreign ownership does not just simply mean financial contribution but the transfer of knowledge, technology, innovations, and management expertise from foreign firms, which are essential to the growth of family firms. Second, foreign shareholders are often perceived as a catalyst for growth and change. If the domestic firm's performance goes downhill, foreign firms can layout necessary efforts to adopt various strategies to improve the firm's value. Third, foreign investors can play an essential role in disciplining managers of family firms, which are mostly recruited from family members without considering market talents.

However, foreign shareholders may easily ruin firm value if they leave firms during an economic slowdown. Another negative point is that foreigners may be biased in making investment decisions by choosing the firms based on their preferences, not by looking and carefully examining the firm's performance. In that case, the higher stock returns or more top market-based indicators do not reflect the firm's true performance. Instead, it only shows the investors' biased preferences (Hideaki et al. 2015). Nonetheless, foreign investors are generally reported to have a positive effect on firm performance in previous literature. Thus, we take the following hypothesis.
