U.S. Companies in Transition Economies: Wealth Effects from Expansion between 1987 and 1999

Abstract:     
This study uses a unique sample to evaluate changes in shareholder wealth from announcements of expansion by U.S. firms into eighteen transition economies, through four entry modes, from 1987 through 1999. Results show that value creation is most significantly associated with expansion through less risky entry modes into host countries that are in the more advanced stages of market liberalization and structural reform. In addition, wealth effects are related to firm characteristics and timing of expansion with significant value creation documented for firms entering transition economies in 1989 and 1990.

Keywords: Foreign direct investment, transition economies, event study

JEL Classifications: F23, G14, P2

Working Paper Series