Aligning the Interests of Subsidiaries and Headquarters in Multinational Corporations: Empirical Evidence

Costello, Ayse Olcay; Costello, Thomas G.
December 2009
Multinational Business Review (St. Louis University);Winter2009, Vol. 17 Issue 4, p163
Academic Journal
To better understand the relationship between the headquarters and subsidiaries of multinational corporations, we introduce and test a theoretical framework that builds on and extends the positive agency theoretic corporate governance literature. Results indicate that there are three types of subsidiary bundles of corporate governance mechanisms that are used by multinational corporations. In addition, the following factors can help predict what type of subsidiary bundle a multinational corporation will use to align the interests of its head- quarters with a particular subsidiary: the multinational corporation's international strategy, its subsidiary's importance, environmental uncertainty faced by its subsidiary, and its subsidiary's age.


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