Foreigners as change agents of organizations and institutions: evidence from Sweden

Foreigners can act as agents of change in organizations more effectively than domestic agents. In this study, I look at Sweden as a natural experiment where I can observe different types of investors and how they may affect change within the firm. The observable result is an improvement in firm performance. I term active foreign investors as those that are concerned about control rights over a firm. Passive foreign investors are defined as those who are concerned more about cash-flow rights as opposed to control rights. I differentiate these two aspects of stock ownership. I find that increased active foreign investors’ ownership in a firm in conjunction with a decrease in control by the largest domestic shareholder improves firm performance. This is consistent with the notion that active foreign investors (mostly from the United States and U.K.) will be more likely to push the firm towards the goal of shareholder wealth maximization while domestic owners may not.