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Many studies find that foreign subsidiaries of multi-national enterprises are more profitable or more productive than firms that operate exclusively in a single domestic market or that produce in and export from a single domestic market. These differences are usually attributed to firm-specific assets. This article explores an additional explanation for the observed profitability differences: agency costs. Specifically, we suggest that MNE subsidiaries perform better than domestic corporations in part because of lower agency costs due to more concentrated ownership. We find support for this hypothesis using data on Canadian companies for the years 1986 and 1991. Key results: The performance advantage of foreign subsidiaries attributable to firm-specific advantages is reduced when one controls for differences in agency costs due to ownership concentration differences between these subsidiaries and domestic firms.