New Evidence on Factors that Influence the Wealth Effects of International Joint Venture Announcements
Posted: 24 Feb 1999
Studies of the wealth effects of international joint ventures report mixed results. However, little work has been done to explain this enigma. We explain this riddle by identifying the factors which influence the wealth effects. Using a sample of 100 ventures that were announced between 1979 and 1994 we find that, on average, international joint ventures have virtually no immediate net impact on shareholder wealth. However, in-depth analysis reveals interesting findings that could explain why the results of previous studies are mixed. We find that the market reaction is more favorable when U.S. firms establish joint ventures in Asian countries, less favorable when the joint venture is established in lower risk developing countries, and less favorable when the joint venture is a manufacturing operation. In an increasingly globalized world, the results of this study hold important managerial implications.
JEL Classification: F23, G12, G14
Suggested Citation: Suggested Citation