Essays On International Joint Ventures And Corporate Finance

摘要

This dissertation includes two chapters on international joint ventures and corporate finance. Chapter 1 is the first to relate the hubris hypothesis (Roll, 1986) to international joint ventures. I investigate shareholder wealth effects of US-China joint venture announcements from 1985 to 2007, utilizing the SDC database. The results show that, on average, investing in China through joint ventures is a wealth-creating activity for US shareholders. However, there is considerable cross-sectional disparity in wealth effects. The worst joint ventures are made by firms with the best recent performance, which suggests that managerial hubris drives bad joint venture investments and damages shareholders' wealth. There is no evidence that agency problems lower shareholder announcement returns significantly. Trading around announcements is consistent with the hubris explanation. The results also suggest that an independent and vigilant board may resist the detrimental effects of managerial hubris. Chapter 2 investigates the shareholder value of 1042 international joint venture announcements made by US firms from 1999-2008. In general, shareholders of US partners announcing IJV investments in foreign countries realize positive and significant abnormal returns. Further analysis shows that IJVs invested outside of the core businesses of both US and foreign partners and formed by partners with different core businesses are most value-increasing for US shareholders. Results suggest that industrial diversification through IJV investments increases shareholder value of US partners, and partner business unrelatedness enhances value creation from diversification. The diversification premium found in this paper also suggests that the international joint venture may be a preferred mode over international acquisition and Greenfield FDI when US firms engage in foreign direct investments outside of their core businesses.