Exploring and Establishing Linkages of Globalization with Financial Performance and Productivity of Firms

Abstract

After experiencing about three decades of the era of globalization, it is pertinent to test the impact of globalizationon the macro and micro-economic variables such as the economic growth and the firms performancein India. The study takes account of both the realm of performance, i.e. financial performance and productivity and examines the effect of globalization on economic growth, financial performance and productivity of firms. To investigate globalization-growth phenomenon, the studyused time-series dataset for the period 1991-2017,for exploring the globalization-firm s financial performance andglobalization-firm s productivity linkage, the unbalanced panel data set of 912 firms was developed for the period2000-2018. The present study not only tests the association but also tries to explore the causal linkages of differentdimensions of globalization with macro/micro economic variables. The study also tried to find outthe influence of globalization on the firms from 14 different sectors of Indian economy to assess the sector-specificperformance. newline newlineThe study uses panel regression, the Johansen co-integration test and VAR/VECM for analysis.The result shows the long-run convergence between the globalization s dimensions and India s economic growth. Thestudy found bidirectional causality between financial globalization and the economic growth. The firms financialperformance is found to have an association with the economic and political globalization. Overall, the investigationfailed to establish the long run integration between different dimensions of globalization and firms financialperformance. The results established causality of economic and political globalization with the financial performanceof the firms, in the short run. In context to productivity, the study found no convergence of globalization with thefirms productivity in the long run. However, when tested for causality, trade, financial and informationalglobalization found to have caused the productivity of firms, in the short run. newline newline