A study of the relationship between international competitiveness and accounting measures of multinational enterprises

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A study of the relationship between international competitiveness and accounting measures of multinational enterprises


Author: Ho, Chi-kun
Title: A study of the relationship between international competitiveness and accounting measures of multinational enterprises
Degree: M.Sc.
Year: 1998
Subject: Competition, International
International business enterprises -- Accounting
Hong Kong Polytechnic University -- Dissertations
Department: Multi-disciplinary Studies
Pages: vi, 107, [80] leaves : ill, ; 30 cm
Language: English
InnoPac Record: http://library.polyu.edu.hk/record=b1421096
URI: http://theses.lib.polyu.edu.hk/handle/200/2707
Abstract: This study explores the accounting measures of international competitiveness of multinational enterprises. Two alternative indicators of international competitiveness have been used: firstly the percentage of foreign sales over total sales of an enterprise, and secondly an enterprise's share of total foreign sales of all enterprises included in the study, and the changes during the study period. The study examines the relationships between these indicators and three groups of independent variables, namely, operational efficiency and effectiveness, innovation and investment, and financial structure, all of which are measured in accounting terms. The relationships are established by correlation and regression analyses of the 1993 to 1995 data for 120 multinational enterprises selected from Fortune Global 500. These enterprises are the top companies in their respective industries, including chemicals and pharmaceuticals, electronic and electrical equipment, services and foods, and motor vehicles. Their foreign sales in these three years average 47% of total sales. The regression equations for the three-year average foreign sales percentage and share of total foreign sales have adjusted R-square values of 0.5296 and 0.8084 respectively. Equations for changes in both dependent variables during the period have adjusted R-square values of 0.7737. These adjusted coefficients of determination confirm that the accounting measures can signinficantly explain the variances in foreign sales percentages and shares of total foreign sales of multinational enterprises. Multinational enterprises with higher foreign sales percentages or share of total foreign sales tend to have bigger firm size measured by sales, lower operating expenses over sales, higher asset utilization, lower returns on assets or equity, lower capital expenditure over sale, lower debt equity ratio, and higher percentages of foreign operating profit and foreign assets. Multinational enterprises with higher growth in foreign sales percentage or share of total foreign sales have made improvements in similar independent variables, for example, reduction in operating expenses over sales, increase in asset utilization, and increase in financial leverage. Other explanatory variables include gross domestic product per capita, interest and currency levels of the enterprise's respective home countries. The regression equations for multinational enterprises grouped by regions or industries have additional explanatory variable such as sales per employee, depreciation, research and development expenditure, interest expenses, and disclosure level. These equations contain different sets of determinants, reflecting the strengths and weaknesses of enterprises of different base regions, and the competitive drivers of different industries. Overall, accounting variables have been prove a stronger set of determinants / predictors of foreign sales percentage and share of total foreign sales. The results in this study support that geographical segment reporting provides relevant information for evaluation of international firm competitiveness.

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