Bridging the Distance: The Influence of Psychic Distance on Internal Financial Governance : A Qualitative Study of a Swedish MNE

Date: 2025-06-03 Level: Bachelor thesis in Business Administration, 15 cr Institution: School of Business, Society and Engineering, Mälardalen University Authors: Andre Lopes David From Gabriel Alberg (03/08/05) (99/06/17) (01/12/30) Title: Bridging the Distance: The Influence of Psychic Distance on Internal Financial Governance - A Qualitative Study of a Swedish MNE Supervisor: Aziza Al Ghafri Keywords: Psychic Distance, Financial Governance, Swedish MNEs, Institutional Theory, Business Network Theory, Internalization Theory Research questions: How does psychic distance influence internal financial governance and control practices in Swedish multinationals? Purpose: The purpose of this paper is to investigate the influence of psychic distance on internal financial governance in Swedish Multinational Enterprises (MNEs). It aims to understand how differences in cultural, institutional and administration affect financial oversight, communication and control mechanisms between headquarters and subsidiaries. Method: This study implements a qualitative research design with the usage of eleven semi-structured interviews. Amongst the interviewees were mid- to senior-level professionals across relevant departments within a Swedish MNE. Thematic analysis was used to analyze the data. Conclusion: Results show that psychic distance poses communication challenges, local adaptation requirements and emphasizes the usage of informal control mechanisms based on trust, all having an effect on financial governance. Swedish MNEs mitigate these effects through hybrid governance models that combine centralized oversight with local flexibility.