Born globals,the choice of globalization strategy,and the market's perception of performance

This paper analyzes which characteristics of born global firms determine their choice for international entry mode. Using a logistic regression analysis, we study 124 newly public firms in the United States that undertake 261 international joint ventures or international acquisitions within the first 6 years of their founding. We find that the market responds positively to announcements of international expansions by born global firms, and that larger, more profitable, and more liquid firms have a higher propensity to engage in joint ventures rather than acquisitions. We also find that the market favors firms that announce joint ventures, rewarding them with significantly positive abnormal returns. Furthermore, while we find that cultural similarity affects mode choice, it does not affect the market's reaction to the announcements.     

Impacts of International Greenfield Investment on Firm Valuation

Our study examines the announcement effects of 343 international greenfield investments by 289 U.S. firms for their impact on shareholder wealth. This paper develops five hypotheses based on the positive‐multinational‐network hypothesis. The evidence indicates that market reactions to announcements by firms entering developing countries are more favorable than those entering developed countries. In addition, the results show that the wealth effect for firms entering a host country for the first time is greater than for those that are already operating within the country. As for the long run, greenfield firms have shown improvement in their operating performance and stock performance. Copyright © 2012 ASAC. Published by John Wiley & Sons, Ltd.     

Do cross-border mergers and acquisitions increase short-term market performance? The case of Chinese firms

Despite the new momentum in cross-border mergers and acquisitions (M&As) by emerging market firms, we have a limited understanding of the impact of these activities. Drawing on signalling theory and the institution-based view, this paper examines the extent of stock market reactions to the announcement of cross-border M&A deals, based on an event study of a sample of Chinese firms during the period 2000–2012. The findings indicate that the announcement of cross-border M&As results in a positive stock market reaction; this effect is more significant in the mainland Chinese stock markets (Shanghai and Shenzhen) than that in the Hong Kong market. The shareholders of Chinese firms that acquire a target firm in a host country with a low level of political risk gain higher cumulative abnormal returns than those firms targeting companies in countries with a high level of political risk. The shareholders of Chinese state-owned enterprises experience lower abnormal returns compared with those of Chinese privately owned firms when engaging in cross-border M&A deals.     

信邦制药股票回购动因及市场效应分析

股份回购在西方发展较早,已经成为资本主义国家公司管理层提高股价或调节资本结构的成熟手段.然而我国的股票回购在21世纪初才起步,实践经验较为不足.本文将分析信邦制药两次股票回购的市场反应并进行对比.结果发现,两次股票回购的实施确实产生了积极的市场影响.此外,基于差异性对比发现,回购目的、回购规模及高管增持公告三方面因素共...     

Strategic alliances by financial services firms

We examine a sample of strategic alliances made by financial services firms during 1986 to 2003. The market reacts positively to the announcements of alliances and seems to incorporate the information about the value of alliances at the time of alliance announcements. We find no evidence of abnormal stock performance after announcements. Our results also suggest that strategic alliances usually are used as a final form of cooperation rather than as a first step towards closer cooperation between firms. For instance, only about 5% of alliances are followed with joint ventures or mergers of partner firms. Nevertheless, strategic alliance firms are more likely to form joint ventures or merge than randomly selected and matched firms. Furthermore, the market reacts more favorably to the alliance announcements by firms that are subsequently acquired by the alliance partners.     

The role of stock markets on environmental degradation: A comparative study of developed and emerging market economies across the globe

It is well established in the literature that stock markets increase both economic activities and energy consumption across countries. Therefore, it is commonly believed that stock markets are expected to have a significant effect on CO₂ emissions. However, it is not known whether these stock markets can contribute to more or less CO₂ emissions. Hence, the goal of this study is to examine the impact of stock market indicators on CO₂ emissions across a global panel of both developed and emerging market economies. The results establish that stock market indicators have a significant negative and positive impact on carbon emissions in developed and emerging market economies, respectively. Furthermore, the findings illustrate the presence of the Environmental Kuznets Curve (EKC) hypothesis, implying that stronger stock markets lead to a further decline in carbon emissions. Given these findings, the study argues that the role of stock markets in the abatement of CO₂ emissions significantly varies across both developed and emerging market economies. Significant implications have to do with the fact that developed markets might have initiated effective policies on listed firms to minimize carbon emissions, while emerging markets are yet to achieve this.     

Do Announcements About Corporate Social Responsibility Create or Destroy Shareholder Wealth? Evidence from the UK

This paper investigates the stock market reaction to the announcement that a firm has been included in the UK FTSE4Good index of socially responsible firms. We use the announcement of firm inclusion in the index to estimate the stock market reaction to a firm being classified as socially responsible. This is an important test of whether investors view the undertaking of socially responsible activities by firms as a value increasing or value decreasing initiative by management. We do not find strong evidence in favour of a positive market reaction. However, there is a large cross-sectional variation in the market reaction to this announcement. Investors appear to be reacting to this event and there are a number of firm characteristics that are well-established proxies for CSR that can explain the market reaction.     

Unraveling the IJV Rationale in Emerging Markets: The Case of Multinational Enterprises in the Russian Construction Industry

ABSTRACT

This article investigates the role of international joint venture strategy of five multinational enterprises in the Russian construction market. Joint ventures play a crucial and specific role for these firms’ strategy in Russia: They serve both as an entry mode and a postentry strategy; facilitate business and guide foreign investors; increase efficiency for further strategy; and help international construction firms overcome the environmental deficiencies. Findings of the article bolster the theory by stressing the facilitating effect of joint venture upon challenges and problems that Western firms meet in emerging market in contrast with more developed economies.     

Performance of international joint ventures from developing and developed countries: An empirical study in a developing country context

In response to the need for research on International Joint Ventures (IJVs) from developing countries, this paper examines the multivariate determinants of performance of 59 IJVs from both developing and developed countries in a developing country context. Resource complementarity, cooperation, joint venture experience, technology and export-orientation were found to be significant determinants of performance of joint ventures. While the determinants varied for IIVs from developing and developed countries, there were no significant differences in their performance levels. The empirical findings and their implications, including limitations and areas for further research are discussed.     

South African Managers' Perceptions of Prospective South African-US Joint Ventures

Abstract

This study explores South African managers' expectations of prospective South African-United States international joint ventures. One hundred and three middle level South African managers responded to a theory-based original survey questionnaire that included questions about various aspects of prospective US-South African joint ventures. US companies invest in South Africa to gain access to its market and South African companies get into joint ventures with US companies to tap into their financial resources. US government's imposed tariffs and South African government's administrative barriers seem to be the most crucial problems for the prospective joint ventures. Implications for international managers are offered.     

Gains from equity carve-outs and subsequent events

This study examines why the stock price of a parent company reacts positively to the announcement of a carve-out. The study also focuses on the gains associated with the combinations of carve-outs and each of four subsequent events: M&A activity, secondary offerings, spin-offs, and reacquisitions. The study finds that these secondary events are useful in evaluating the potential market reactions to carve-out announcements. By analyzing 201 carve-outs conducted by nonfinancial firms in the U.S., this study finds that the stock market reacts favorably toward the stock of a parent company when the parent-subsidiary relationship is preserved after a carve-out. However, this reaction changes when secondary events occur. To be precise, the market does not have a significantly positive reaction to the parent company's stock when the announcement concerns only M&A. These results indicate that the stock market expects secondary events when companies announce carve-outs and that it evaluates the combination of events upon the announcement of the carve-outs. In addition, this study finds that the market expects M&A as a secondary event.     

International Equity Joint Ventures in Ghana and Cote D'Ivoire

Abstract

This paper examines international equity joint ventures (IJVs) in West Africa, presenting data from 45 British and French alliances with local partners in Ghana and Cote D'Ivoire. A comparison with prior studies finds remarkable consistency in the characteristics of IJVs between firms from DCs and LDCs in the following dimensions: motives, instability, asymmetry in equity distribution, frequency of government association, source of CEO, autonomy in management. Differences in IJVs between developed and less developed countries appear cursory rather than fundamental and focus on MNEs' dissatisfaction with IJV performance, the control relationship, and level of equity.     

Joint Ventures in Russia

There is an extensive literature on the role of joint ventures in international business. Most of this has focused on the involvement of multinational enterprises (MNEs) in establishing joint ventures in developing countries. Recent political and economic reforms in Eastern Europe have focused attention on joint venture opportunities in ex-centrally planned economies, including opportunities for small and medium-sized enterprises. This paper examines the experiences of two small, family owned Scottish companies in establishing joint ventures in the largest of the East European countries, the Russian Federation. The cases highlight the important strategic and managerial issues involved in planning, negotiating and implementing joint ventures with Russian partners. Sensitivity to the business development needs of the host organization, the establishment of good personal relationships and flexibility are crucial to the joint venture process.     

Corporate social investments: Do they pay?

The stock market reaction to two very different corporate social investments (the 1977 Sullivan Principles adoption announcement and the 1990 McDonald's Corporation environmental statement) is explored. A market model event study methodology is employed using daily stock returns. The results are that the stock market appears to have ignored the 1977 announcement, but rewarded the 1990 event. Future research and possible managerial implications are discussed.Steve McMillan is a doctoral candidate in General and Strategic Management. His research focuses on organizational policies of openness versus secrecy with scientific information, and the management of corporate intangible assets.     

中国上市公司违规处理信息提前泄露了吗——来自股票流动性和融券交易的证据

本文从股票流动性和融券交易的视角出发,实证检验我国上市公司违规处理信息提前泄露的可能性。研究发现:(1)违规处理公告之前,股票超额非流动性水平和超额融券量显著为正,且与违规处理公告日的超额收益率显著负相关;(2)公告日超额收益率最低组股票的公告前超额非流动性更高,而公告日超额收益率最高组股票的公告前超额融券量更少;(3)当违规处理文件的下批日期与公告日期间隔超过10日时,公告日超额收益率较高的公司股票,其公告前的相对超额融券量显著减少,表明知情交易者占据了主导地位,处理公告的提前泄露更可能解释以上发现。本文的结果表明,监管部门应加强内部管理和提升工作效率,及时公布违规公司处理文件以减少信息提前泄露的可能性,从而有利于股票市场的健康发展。     

Entering China Today

Summary

The peripherally growing and remarkably dynamic Chinese economy is now encouraging the use of more diverse and creative entry modes for international investors. This article illustrates various entry modes of foreign direct investment available at present to foreign companies entering China. These entry modes include equity joint ventures, wholly foreign owned subsidiaries, contractual joint ventures, umbrella companies, acquisitions, representative offices, branches, build-operate-transfers, licensing and franchising. The merits and limitations of each entry mode are discussed. Some practical advice on entry strategies for international executives active in the Chinese market is also highlighted.     

Do the English Legal Origin Countries have More Dispersed Share Ownership and More Developed Financial Systems?

The essence of the legal origin hypothesis is that a country with an English legal origin provides better investor and creditor protection and experiences greater financial development; financial institutions and stock markets flourish, the general public participate more in financing investment projects of companies and so shareholding is less concentrated. The present paper examines this hypothesis on the basis of a cross‐country study of 85 countries. We find no evidence of more dispersed share ownership in the English law countries than in other countries with different legal origins irrespective of whether we adjust for the existence of transitional economies and less developed countries in the sample. Using three indicators of development of banking and other credit institutions and four indicators of stock market developments, we also find no evidence of more developed financial systems in the English law countries. As expected, there is some evidence of lower financial development in the less developed countries and transitional countries. It is not the English law heritage but the security of persons and goods that appears to explain the cross‐country variations in financial development.     

Rating timing differences between the two leading agencies: Standard and Poor's and Moody's

This study examines the impacts of rating change timing differences between the two leading agencies, namely, Standard and Poor's and Moody's with particular focus on the stock market impact of Standard and Poor's Foreign Currency rating changes and Moody's Bonds and Notes rating changes. The analysis focuses on whether there is a rating change pattern between these agencies and undertakes a comparison of the impact of rating changes on the markets between single rating changes and joint rating changes. The paper equally determines whether rating changes induce different reactions depending on the level of rating. The findings indicate that in contrast to the results obtained in previous literature, rating change announcements do not impart additional information to the market. An interesting finding is that joint downgrades seem to impact on the market only in-between the announcement dates for the two agencies. In addition, the reason of the rating change needs to be taken into consideration to assess the stock market reaction to rating changes.     

Small and medium-sized transnational corporations: Salient features

This second half of a series on small and medium-sized transnational corporations (TNCs) describes their main features in terms of such variables as the markets and industries in which they operate, ownership, forms of investment, performance and competitive advantages. It also deals with strategies that small and medium-sized enterprises (SMEs) tend to take in their foreign operations.An appreciable share of small and medium-sized TNCs produces highly-specialized or niche products that give them relatively high market power in those market segments. Their principle source of advantages emanate from proprietary technology, flexible management, organization and market ability, reputation and supplier/customer relations. Small and medium-sized TNCs, unlike their larger counterparts, are more likely to enter developing countries through joint ventures and other collaborative arrangements with local firms. SMEs from some developed countries, mainly Europe, are particularly willing to enter joint ventures.Transnational Corporations Affairs Officer United Nations Conference on Trade and DevelopmentThe aurthor is grateful for advice and comments by Hafiz Mirza. This paper is based on the chapter IV of the UNCTAD Programme on Transnational Corporations,Small and Medium-sized Transnational Corporations: Role, Impact and Policy Implications, New York: United Nations publication, Sales no. E.93.II.A.15, 1993.     

Contextualizing international learning: The moderating effects of mode of entry & subsidiary networks on the relationship between reforms & profitability

This empirical paper studies how MNEs from developing and emerging markets may learn through their choice of entry mode and subsidiary network configuration, and use this knowledge to increase their responsiveness to pro-market reforms in their home market. The paper proposes that entry modes and network configurations that facilitate knowledge acquisition provide firms from developing countries an advantage when responding to such institutional changes. The analyses use data for the largest Latin American companies from 1989 to 2008. The findings provide evidence for a positive moderating effect of equity international joint ventures, international acquisitions, and subsidiary network centrality closeness on the relationship between reforms and profitability.