Page 11 - 34-3

NTU Management Review
Vol. 34 No. 3 Dec. 2024, 1-44
https://doi.org/10.6226/NTUMR.202412_34(3).0001

Divestiture from China by Taiwanese Listed Electronic
Information Firms: Effects of Host Country Performance and
Selection Bias

臺灣上市櫃電子資訊業撤離大陸的決策：檢驗地主國績效
與選擇偏誤的影響

Jen-Jen Tseng, Department of Finance, Chien Hsin University of Science and Technology
曾真真 / 健行科技大學財務金融系
Yung-Cheng Lai, Department of International Business, Chien Hsin University of Science and
Technology
賴勇成 / 健行科技大學國際企業經營系
Tzu-Chuan Kao, Department of Financial Management, Kun-Shan University
高子荃 / 崑山科技大學金融管理系
Received 2022/10, Final revision received 2023/11

Abstract
Past literature has often explained withdrawal decisions from the host country regarding
financial performance, suggesting that poor performance of foreign subsidiaries or
divisions forces the parent company to withdraw to avoid further losses. However,
decision-makers sometimes exhibit an escalation of commitment, where they increase
investment despite poor performance in the host country, refusing to acknowledge
investment failure. Additionally, companies might abandon profitable business units to
avoid uncertainty, resulting in a lack of convergence between host country performance
and withdrawal decisions. This study re-examines the impact of investment performance
in mainland China on withdrawal decisions based on firm behavior and prospect theory
theories. Using data from the Taiwan Economic Journal (TEJ) database, the study focuses
on 506 publicly listed Taiwanese electronic information companies that invested in the
Chinese market from 2016 to 2020, yielding 2,530 observations for empirical analysis. The
analysis was conducted using two-stage research method (Heckman, 1979). The findings
reveal an inverted U-shaped relationship between investment performance in China and
withdrawal decisions when the investments are profitable. Conversely, firms are less likely
to withdraw from China when investments are unprofitable. Additionally, we found a
positive relationship between withdrawal from China and market performance. Finally,
correction factors and decision errors are statistically significant, effectively controlling for
selection bias.
【Keywords】risk-taking, divesture decision, performance feedback, selection bias

領域主編：陳忠仁教授

1