Subsidiary Staff Composition and Repatriation of Earnings: Moderating Effects of Subsidiary Ownership and Age

Whether and how much to repatriate earnings from a foreign subsidiary to its headquarters are one of the most important decisions for multinational corporations. Based on the premise that the subsidiary–headquarters relationship is basically an extended agent–principal relationship, we investigate the repatriation of earnings by focusing on the subsidiary staffing composition. Specifically, we claim that the higher the ratio of host country nationals in subsidiary executive positions, the lower the repatriation of earnings, suggesting that subsidiary staffing composition is an important consideration for the repatriation of earnings. Moreover, we investigate how the relationship between subsidiary staffing composition and repatriation of earnings varies with subsidiary power, which is captured by subsidiary equity ownership and subsidiary age. We test our hypotheses analyzing data on Korean multinational enterprises and their subsidiaries between 2006 and 2013. Our findings contribute to the literature on repatriation of earnings, agency theory, and international business.