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With the development of the economy, an increasing number of listed companies form subsidiaries in China. Though the increase in the number of subsidiaries affects the hierarchical structure and risk of conglomerates, few studies relate the hierarchical relationship between the parent company and its subsidiaries to its capital market performance at the conglomerate level. Therefore, this study aims to investigate the relationship between the number of subsidiaries and crash risk.

Using a sample of all the A-share companies in the Shanghai and Shenzhen stock markets from 2007 to 2015, this study conducts multivariate regression analyses between the number of subsidiaries and the stock price crash risk.

This study finds an inversed U relationship between the number of subsidiaries and the stock price crash risk, and the above inversed U relationship is steeper in conglomerates with stronger managerial power and less finance distress.

This research has an incremental contribution to the agency problem and governance effect of the parent–subsidiary system in conglomerates. To the best of the authors’ knowledge, this is the first study to show a significant quadratic relationship between the future crash risk and the number of subsidiaries. This paper provides new evidence that the number of subsidiaries has an incremental ability to predict future firm-specific crash risk above other predictors identified by previous research.

The purpose of this paper is to examine the relationship between foreign subsidiary staffing and subsidiary performance by focussing on two staffing practices: first, the ratio of parent country nationals (PCNs) to foreign subsidiary employees and second, the number of PCNs assigned to the foreign subsidiary.

Hypotheses predicting curvilinear relationships between the assignment of PCNs and subsidiary performance are tested using a panel data set consisting of 4,858 foreign subsidiaries of Japanese multinational corporations (MNCs).

The results demonstrate that the two staffing practices have different effects on subsidiary performance. The ratio of PCNs to foreign subsidiary employees has an inverted U-shaped relationship with subsidiary performance, while the number of PCNs assigned to the subsidiary has a linear and negative effect on subsidiary performance.

The results of this study are subject to limitations. First, the sample used in this study consists solely of the foreign subsidiaries of Japanese firms. This research design limits the generalizability of the findings of this study. Second, other decisions related to subsidiary staffing such as the ratio of PCNs in the subsidiary's top management team need to be examined to advance understandings of the relationship between subsidiary staffing and subsidiary performance.

MNCs need to identify the appropriate number of PCNs at which they can achieve the optimal trade-off with the PCN ratio to enhance the competitiveness and the performance of a foreign subsidiary. In doing so, they need to take into consideration that an increase in the number of PCNs has an immediate negative effect on the workplace morale of host country nationals.

This study incorporates two staffing practices into its analyses and shows that they have different implications for subsidiary performance. The results suggest that focussing on one staffing practice alone limits understanding of the complex relationship between foreign subsidiary staffing and subsidiary performance.

This paper provides a primer on European multinational business groups (BGs) and their subsidiaries. Firms in these BGs appear to have higher sales performance than firms in domestic groups (15% higher). This leads us to investigate which elements increase the likelihood that a group will transition towards multinational status. BGs’ characteristics matter for foreign acquisition: groups becoming multinational are usually larger, have a more hierarchical structure with respect to the number of layers in a group, and are more diverse in terms of sectors. Groups tend to expand into bordering countries or countries providing particular advantages, such as a large internal market. The first acquisition is a corporate-level decision that appears to be made by the group’s controlling firm and is often a diversification into a different industry.

This paper examines how a firm's hierarchical complexity, which is determined by the way it organizes its subsidiaries across the hierarchical levels, can impact its stock price crash risk.

The authors employ a measure of hierarchical complexity that captures the depth and breadth of how subsidiaries are organized within a firm. This measure is calculated using information about firms' subsidiaries extracted from the Bureau van Dijk (BvD) database that allows the authors to construct each firm's hierarchical structure. The data sample includes 2,461 USA firms for the period from 2012 to 2017 (11,006 firm-year observations). Univariate tests and panel regression are used for the main analysis. Two-stage-least-squares (2SLS) instrumental variable regression and various other tests are employed for robustness check.

The results show a positive relationship between hierarchical complexity and stock price crash risk. This relationship is amplified in firms with a greater number of subsidiaries that are hierarchically distanced from the parent company as well as in firms with a greater number of foreign subsidiaries in countries with weaker rule of law.

This paper is the first to investigate the impact hierarchical complexity has on crash risk. The results highlight the role that a firm's organizational structure can have on asset pricing behavior.

This paper aims to contribute to the regionalisation–globalisation debate in international business (IB) by providing a longitudinal analysis of firm-level multinationality. The analysis uses a unique hand-collected data set of both accounting (sales) and non-accounting (subsidiaries) data. The percentage of foreign sales is also used as an additional measure of multinationality.

This paper categorises constituent firms of the Financial Times Stock Exchange 350 index over an 18-year time period from 1998 to 2015. Firms are categorised using the multinationality classification system developed by Aggarwal et al. (2011). The paper also conducts an industrial analysis across ten industries.

The evidence shows increasing multinationality over time that suggests a “trans-regional” operational strategy rather than a global or regional one. The results also show that UK firms are more multinational based on subsidiaries than sales. This contradicts the traditional stages theory of internationalisation where firms first expand sales, then subsidiaries. While some support for triad regions is found, there is also evidence of firm-level operations expanding beyond the triad regions of North America, Asia and Europe to non-triad regions such as Africa, Oceania and South America. The industrial analysis shows that non-service firms are more multinational than service firms.

To the best of the authors’ knowledge, this is the first paper to provide an in-depth longitudinal analysis of the geographical dispersion using both sales and subsidiaries data for UK firms. This paper provides a unique perspective on the regionalisation–globalisation debate in IB and presents evidence contrary to traditional stages theories of firm-level internationalisation.

The purpose of this paper is to analyze the factors that have influenced the withdrawal of Japanese overseas food industry subsidiaries from Asia.

The data refer to Asian subsidiaries of Japanese companies engaged in food production activities. The data set covers 545 overseas subsidiaries from 2003 to 2014, and the total number of observations is 3,513. A linear probability model examines the factors influencing the probability of a subsidiary withdrawing.

The results show that strong relationships between parent companies and overseas subsidiaries, specifically in terms of personnel and capital, reduce the likelihood of withdrawal. The number of years in business has a positive effect on withdrawal. Additionally, investment aims, such as the establishment of an international production network and acquisition of host country markets, affect the probability of withdrawal. The results are similar for subsidiaries in China and other countries, but there are differences regarding subsidiaries’ histories and investment aims.

There is limited research on food companies withdrawing from overseas markets. This study bridges the gap in the literature by compiling micro-level data and conducting a quantitative analysis of such withdrawals from overseas markets. The originality of this study is that it shows the effects of investment aims on subsidiary withdrawal, representing various aspects of overseas subsidiaries, and compares the estimation results with the recent trends in food markets in Asia.

To test the hypothesis of increased specialisation during the 1980s in the aggregate pattern of intercorporate ownership in the Canadian economy.

The network of ownership between enterprises and subsidiaries is characterised for the period 1976‐1995 using data for the population of medium‐sized and large Canadian corporations collected by Statistics Canada.

Aggregate diversification declined slightly over the period in terms of the average number of industry groups in which enterprises have subsidiaries. However, there was an increased likelihood that subsidiaries were outside of the core industry group of the enterprise.

The data provide insight into ownership changes across the economy and are not sensitive to changes in a few very large firms. However, a weakness of these data is that the ownership linkages are not weighted to reflect the economic importance of the enterprises involved. There is evidence that the pattern of inter‐corporate ownership is different between manufacturing and service sectors. Future research should treat these separately.

Increased specialisation to the core industry of an enterprise has implications for the management skills required to design and manage networks of independent firms (for example, through strategic alliances), the performance expectations and risks taken by shareholders, and the commercial and tax policies set by government. At an aggregate level, a reduction in diversification may change the industrial structure of the economy, with sectors less integrated through ownership relationships, and thus potentially more sensitive to patterns of market exchange.

Much of the literature on the effect of ownership restructuring on aggregate diversification is focused on the US economy, and there is little empirical evidence in the Canadian context. The data are unique, representing a population of medium‐sized and larger firms. To our knowledge there are no published analyses of the ownership structure represented in these data.

This paper explores the potential competitive advantages from the development of an internal network of subsidiaries and external network of alliances. Given the broad scope and lack of systematic investigation in prior research, clinical field research was conducted in eleven Japanese subsidiaries in China. Our in‐depth interviews revealed that there are benefits and costs associated with the development of both subsidiary networks and alliance networks. While there are exploitation and exploration benefits from subsidiary network development, internationalizing firms (especially smaller firms) are subject to the liability of foreignness. Alliance network development is an effective way to mitigate this liability if internationalizing firms choose the right alliance strategy.

In today’s ever-increasing context of volatile, uncertain, complex and ambiguous market conditions, the shifts of countries’ protectionist policies toward inward Foreign Direct Investment (FDI), and an increased gap between headquarters’ (HQ) and subsidiaries’ perspectives on what makes business sense, it has become apparent that challenges toward foreign expansion are becoming more severe and require a multidimensional dynamic approach. The authors draw from orchestration theory, dynamic capabilities literature and previous literature on dimensions of internationalization [specifically, density, geographic distance and degree of diversity of the multinational corporation (MNC) subsidiary network] to argue that firms must enhance their orchestration capability. In doing so, this study aims to highlight the nuances of orchestrating a three-dimensional (3D) conceptualization of MNCs’ international configurations.

The authors analyzed the patterns of configurations that are adopted by MNCs. This sample was made up of the international configuration of 78 Fortune 500 MNCs consisting of 3,318 foreign subsidiaries. Furthermore, the authors examined the impact of different configurations of the 3Ds on firm performance using ordinary least squares regression analysis.

While the research did indicate that the sample MNCs adopted the sample configurations of the three internationalization dimensions more frequently than others, the authors found that orchestrating MNCs with an international configuration characterized by high density, low geographic distance and low internetwork scope diversity had a positive impact on firm performance.

While international expansion is often motivated by financial performance or market/resource gains, it is also impacted by the firm’s dynamic capability profile. Thus, as MNCs seek to continue to expand globally, they must assess and, if needed, develop their management team’s orchestration capability, which includes effectively determining how the addition or removal of a subsidiary will impact the density, geographic distance and diversity dynamics of the MNC’s international configuration. Finally, the management team needs to be able to devise plans to respond to the potential challenges associated with each of these dimensions.

The contribution of this study includes bringing a dynamic capabilities lens to the extant international business literature examining the multinationality and performance relationship by highlighting the importance of an MNC’s process orchestrating capability that is needed for firms to effectively manage increasingly complex subsidiary networks. It also conceptually explains and empirically supports that some configurations are likely to yield higher returns than others, which can act as a guide for firms as they are seeking to expand in more geographically distant as well as diverse sectors. Furthermore, this study highlights the need for a multidimensional simultaneous approach to the examination of internationalization to performance relationship. Finally, it highlights the tradeoffs that MNCs must address across the orchestration of the three internationalization dimensions using a dynamic capabilities theoretical lens that acknowledges the differences in perspective that exist between HQs and subsidiaries.

This paper aims to examine the effect of audit quality of consolidated financial statements on the accuracy of analysts’ earnings forecasts from the viewpoint of users of financial statements.

This paper investigates the effect of dependence on the work of other auditors on error in analysts’ earnings forecasts based on samples from 2011 to 2012 (the period since implementation of the International Financial Reporting Standards in Korea). In addition, this paper examines the effects of use of Big 4 auditors, use of auditors with industry expertise and the proportion of overseas subsidiaries in relation to all subsidiaries on the association between dependence on the work of other auditors and error in analysts’ earnings forecasts.

This paper finds a positive relation between dependence on the work of other auditors and error in analysts’ earnings forecasts, suggesting that more dependence on the work of other auditors decreases the quality of the audit of consolidated financial statements; thus, to the extent that low-quality audits decrease reporting reliability, analysts’ forecasts are less likely to be accurate. This paper also finds that the positive relationship between dependence on the work of other auditors and error in analysts’ earnings forecasts is weakened when the principal auditor is a Big 4 auditor or one with industry expertise, because such auditors provide higher-quality audit services. However, the positive relationship between dependence on the work of other auditors and error in analysts’ earnings forecasts is further strengthened in cases where the proportion of overseas subsidiaries to all subsidiaries is higher. These results suggest that the complexity of the consolidation process increases as the proportion of overseas subsidiaries increases.

The findings are useful in analyzing the effects of adoption of the New ISA, implemented in 2014, which does not allow the division of audit responsibilities between principal auditors and other auditors. This paper also provides insights for regulators and practitioners to improve the auditor appointment system in the future.