Navigating Dual Pressures: Governance Structures and Legitimacy of Foreign Subsidiaries in Chinese Multinational Enterprises

Abstract

This paper explores the critical role of subsidiary governance in shaping the legitimacy of foreign subsidiaries, focusing on two key governance components: board composition and CEO hiring. In the context of multinational enterprises (MNEs) from emerging economies, particularly Chinese MNEs, the study investigates how governance structures are designed to achieve legitimacy in foreign markets. The paper utilizes a comprehensive dataset consisting of 116 publicly listed foreign subsidiaries of Chinese MNEs, spanning the period 2005 to 2021, to provide a detailed analysis of subsidiary governance practices across a range of industries and countries.