We question previous research assuming that privatizing firm performance generally benefits from decreasing state ownership and the passage of time, both of which purportedly align principal–agent incentives promoting organizational decision-making that increases shareholder value. When state ownership shifts from majority and controlling to minority and non-controlling, the performance impact may be positive in the short run, particularly where there is instability in the local investment policy environment. Consistent with this proposition, we develop and test hypotheses derived from a minority and non-controlling or “residual” state ownership framework, grounded in credible privatization and institutional theory. We propose that: (1) residual state ownership positively affects shareholder returns after strategic decisions by privatizing firms because it signals state support for managerial initiatives; (2) the passage of time since initial privatization negatively affects shareholder returns after strategic decisions by privatizing firms because initial undertakings in support of the privatizing firm are reversed; and (3) home-country investment policy stability moderates these two effects – greater stability obviates the need for residual state ownership, and slows policy reversals over time. We find empirical support for our residual state ownership framework in event study analyses of cumulative abnormal returns (“CARs”) associated with 196 major investments announced from 1986 to 2001 by 15 privatizing telecoms from around the world. CARs are positive at 5–25% state ownership levels but turn negative at higher state ownership levels. CARs turn sharply negative within 1–2 years from initial privatization dates. Increasing policy stability diminishes positive ownership and negative time effects on CARs. Results confirm the potential supporting role that residual state ownership can play in enhancing strategic decision-making and financial performance by privatizing firms, particularly where there is instability in the home-country investment policy environment. Journal of International Business Studies (2009) 40, 621–641. doi:10.1057/jibs.2008.104

We empirically examine whether and how opportunistic and partisan political business cycle ("PBC") considerations explain election-period decisions by credit rating agencies ("agencies") publishing developing country sovereign risk-ratings ("ratings"). Analyses of 391 agency ratings for 19 countries holding 39 presidential elections from 1987-2000, initially suggest that elections themselves prompt rating downgrades consistent with opportunistic PBC considerations, that incumbents are all likely to implement electionperiod policies detrimental to post-election creditworthiness. But more refined analyses, integrating both opportunistic and partisan PBC considerations in a unified framework, suggest that election-period agency downgrades (upgrades) are more likely as right-wing (left-wing) incumbents, become more vulnerable to ouster by challengers. Together, these results underscore the importance of integrating both opportunistic and partisan PBC considerations into any explanation of election-period risk assessments of agencies and, perhaps, other private, foreign-based financial actors important to the pricing and allocation of capital for lending and investment in the developing world.

International business research has paid scant attention to whether and how electoral politics and economic policies affect foreign investment risk assessment, particularly in developing countries, where the last decade has seen both considerable foreign investment and domestic progress toward democratization and electoral competitiveness. We respond with development and testing of a framework using partisan and opportunistic political business cycle (PBC) theory to predict the investment risk perceived by investors holding sovereign bonds during 19 presidential elections in 12 developing countries from 1994 to 2000. Consistent with our framework, we find that bondholders perceive higher (lower) investment risk in the form of higher (lower) credit spreads on their sovereign bonds as right-wing (left-wing) political incumbents appear more likely to be replaced by left-wing (right-wing) challengers. For international business research, our findings illustrate the promise of PBC theory in explaining the election-period behavior of sovereign bondholders and, perhaps, other investors who also ‘vote’ in developing country elections and can substantially influence the price and availability of capital there. For developing country investors and states, our findings highlight the financial effects of democracy in action, and underscore the importance of state communication with investors during election periods. Journal of International Business Studies (2005) 36, 62–88. doi:10.1057/palgrave.jibs.8400111

An emerging "bonding hypothesis" holds that a firm's geographic domicile may not determine its corporate governance destiny. Firms from countries with weaker corporate governance regimes can internationalize their legal (but not necessarily operational) presence by cross-listing their securities on overseas financial markets. They can "bond" with legal systems and enforcement policies in foreign corporate governance regimes providing stronger investor protection. Cross-listing to bond increases firm value by decreasing corporate misconduct, broadening the investor base, and lowering the cost of capital. We document evidence of cross-listing to bond with stronger legal systems and rule of law by more than 700 firms from 23 emergingmarket countries cross-listing their securities on US financial markets from 1996-2006. We find that: 1) US cross-listing levels are lower for firms from Common Law countries providing stronger investor protection, but only in Common Law countries with weaker rule of law; 2) US cross-listing levels are higher for firms from Civil Law countries providing weaker investor protection, but only in Civil Law countries with stronger rule of law; and 3) such US cross-listing trends do not vary with the enactment of major US corporate governance reforms in the 2000s. Emerging-market firms exhibit behavior consistent with bonding hypothesis considerations and cross-list as a commitment to a more rigorous corporate governance regime, but the behavior is contingent and depends on examination of both legal system and rule of law effects individually and in interaction. Our empirical results highlight the importance of broadening investigating of firm internationalization to consider legal dimensions. Firms have discretion to choose foreign corporate governance regimes with less or no regard to where their operations are located.Keywords: corporate governance, internationalization, law, finance, cross-listing, bonding 3 IntroductionThis empirical study examines links between the quality of corporate governance regimes in emerging-market countries and efforts by emerging-market firms to internationalize their legal presence through cross-listing shares on US financial markets and "bonding" with substantive US laws and rule of law.Over 30 years of management research has produced rich theoretical and empirical bases to explain motives for and performance implications of firm internationalization. Prominent theories hold that firms are motivated to expand operations abroad as multinational enterprises ("MNEs") in order to internalize and exploit international market imperfections (Buckley and Casson, 1976), to minimize international transaction costs in the presence of opportunistic foreign counter-parties (Hennart, 1982), to cope with difficulties in identifying, absorbing, and transferring distant and tacit knowledge sources (Kogut & Zander, 1993), and to manage the confluence of ownership, locational and internalized market opportunities available to the firm (Dunning, 1977 , 1999a, 1999b, 20...

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