The Control and Performance of Joint Ventures

Financial Management, Forthcoming

Posted: 21 Sep 2015 Last revised: 6 Jun 2016

See all articles by Tomas Mantecon

Tomas Mantecon

University of North Texas

Kyojik Song

Sungkyunkwan University

Haowen Luo

University of North Texas

Date Written: September 18, 2015

Abstract

We analyze the control and performance of assets operating in joint ventures (JVs). Control in JVs is determined by the allocation of voting rights and by the contracts that govern the JVs. This hybrid allocation of control is aimed to ameliorate the potential for ex-post opportunism. An equal distribution of voting rights in the JVs’ board is associated with lower performance. Contractual provisions that determine the control in JVs are generally associated with a negative performance of JVs governed by equally controlled boards, but with a positive performance of JVs with boards controlled by one partner. The analysis suggests that contractual provisions encourage collaboration and improve JVs’ performance when one of the partners accepts a minority position in the board. The analysis also reveals that, with the exception of JVs with contractual option provisions, assets operating in our sample of JVs generate higher returns than assets in fully controlled subsidiaries.

Keywords: Joint ventures; joint control; joint ownership

JEL Classification: D23, L22, L24

Suggested Citation

Mantecon, Tomas and Song, Kyojik and Luo, Haowen, The Control and Performance of Joint Ventures (September 18, 2015). Financial Management, Forthcoming , Available at SSRN: https://ssrn.com/abstract=2662756

Tomas Mantecon (Contact Author)

University of North Texas ( email )

1155 Union Circle #305340
Denton, TX 76203
United States

Kyojik Song

Sungkyunkwan University ( email )

53 Myeongnyun-dong 3-ga Jongno-ju
Guro-gu
Seoul, 110-745
Korea, Republic of (South Korea)
82-2-760-0497 (Phone)

Haowen Luo

University of North Texas ( email )

1155 Union Circle #305340
Denton, TX 76203
United States

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