Growth Opportunities, Corporate Governance and the Market Value of Multinational Joint Ventures
Posted: 20 Oct 2000
Date Written: December 1994
We examine whether differences in investment opportunities and corporate ownership structure can explain the disparate findings of other researchers regarding the market's price reaction to the announcement of international joint ventures. We study a sample of 320 such ventures from the period 1987-92. The ventures involve at least one U.S. partner and one or more international partners from emerging economies (former communist countries in Eastern Europe and China), as well as industrialized G7 countries. We find that international joint ventures are on average wealth creating when the foreign partner comes from an emerging economy but not when the partner is from an industrialized country. This finding supports the investment opportunity set hypothesis. In addition, we provide some support for the shareholder-management alignment hypothesis in that higher insider holdings for the U.S. partner within the range of 5% to 25% lead to joint venture investments that are more highly valued by investors, other things remaining the same.
JEL Classification: G30
Suggested Citation: Suggested Citation