Financial Performance of Czech Companies with Foreign Capital
Keywords:financial performance, multinational companies, foreign capital, foreign direct investment
AbstractPurpose of the article: There is a notion that multinational companies outperform domestic ones. The literature offers many reasons for it. On the contrary some foreign studies show that reality is not so evident. How does it look like in the Czech Republic? Scientific aim: The aim of this paper is to find out whether financial performance of companies with foreign capital evince higher financial performance than companies with only Czech capital. Methodology/methods: In this research financial performance of middle and large Czech enterprises has been examined. Company financial performance has been measured by the five-year (2005–2009) mean of rentability of assets and assets growth. Data from 73% of these companies was available. From these measured companies 32% of them have some foreign capital. Exclusively domestic capital was found out by 45% of measured companies. The information of owner’s country was not available for last 23%. The difference between financial performance of Czech companies with and without foreign capital has been measured by Mann-Whitney U test. Findings: Median of assets growth and return of assets of foreign-owned companies were 7.76% and 6.61%. Results for Czech-owned companies were 9.48% and 7.74%. The differencies are statisticaly significant. Assuming that companies with unknown country of owners are mainly domestic-only owned, the differencies in financial performance are not statistically significant. The financial performance differs according to the counry of foreign capital origin. Conclusions: The results did not confirmed the notion that foreign-owned enterprises are financially more efficient than domestic companies. The part of explanation may lie in the possible existence of inaccurately valued supplies within multinational companies. This possibility should be further examined.
ORIGINAL SCIENTIFIC ARTICLE