National Culture and Governance on Bondholder Wealth: Evidence from Joint Ventures and Strategic Alliances around the World

Quarterly Journal of Finance, Forthcoming

55 Pages Posted: 4 Feb 2017 Last revised: 9 Jan 2018

See all articles by Jun Chen

Jun Chen

North Dakota State University

Tao-Hsien Dolly King

University of North Carolina (UNC) at Charlotte - Department of Finance

Xinxin Li

University of North Carolina (UNC) at Charlotte - Finance

Date Written: October 15, 2017

Abstract

This paper examines bondholder wealth effects in global business collaborations with the form of cross-border joint ventures (JV) and strategic alliances (SA). Based on a sample of 1,898 event-firms from 2009 to 2015, we find significant and positive abnormal returns for bondholders. On average, bondholder value increases 14.4 basis points in a 3-month observation window. We find that country level governance and national culture are dominant drivers of bondholder wealth effects. More specifically, bondholders benefit more from JV and SA if they are from countries with poorer institutional governance or greater regulatory governance in creditor protection (higher creditor rights and lower shareholder rights). In addition, bondholders gain more when they are from countries characterized with greater Individualism, less Power Distance, a higher level of trust, or larger culture distance. Robustness tests and subsample analyses confirm the main findings. We find a positive impact of joint ventures and strategic alliances on stockholder wealth but little evidence for wealth transfer between stockholders and bondholders.

Keywords: Joint Ventures, Strategic Alliances, Bondholders Wealth, National Culture, Country Governance

JEL Classification: G34, M14, M16

Suggested Citation

Chen, Jun and King, Tao-Hsien Dolly and Li, Xinxin, National Culture and Governance on Bondholder Wealth: Evidence from Joint Ventures and Strategic Alliances around the World (October 15, 2017). Quarterly Journal of Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2911222 or http://dx.doi.org/10.2139/ssrn.2911222

Jun Chen

North Dakota State University ( email )

Fargo, ND 58105
United States

Tao-Hsien Dolly King

University of North Carolina (UNC) at Charlotte - Department of Finance ( email )

9201 University City Boulevard
Charlotte, NC 28223
United States
704-687-7652 (Phone)
704-687-6987 (Fax)

Xinxin Li (Contact Author)

University of North Carolina (UNC) at Charlotte - Finance ( email )

9201 University City Boulevard
Charlotte, NC 28223
United States

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