Risk and wealth effects of U.S. firm joint venture activity

Using a sample of US firms engaged in joint venture activity primarily in the 1990s, we test the hypothesis that joint venture activity is motivated by a desire for efficient risk sharing. We find that approximately ninety-six percent of our sample experiences a risk change in response to joint venture activity. A significant proportion of these experience a reduction in beta. No market price response is evident in conjunction with this reduction. In addition, the average parent firm experiences a significant increase in firm risk, which we attribute to taking on the risky joint venture. This increase in risk is particularly pronounced for firms engaged in international joint ventures and is accompanied by a positive market response. Investment stake, pre-venture firm profitability, size and private risk increasing characteristics appear to influence the wealth character of the joint venture. We interpret that there may be a positive market premium for international diversification effects and/or for the flexibility that the real option joint venture opportunity provides.     

The potential for expropriation through joint ventures

We examine the potential expropriation of a firm's intellectual capital that results from joint venture agreements when a firm's joint venture partner becomes the target of an acquisition attempt. We find that: (1) non-targeted joint venture partners often suffer losses in value upon the announcement of the acquisition; (2) the magnitude of the loss increases with the R&D intensity of the non-targeted joint venture partner; and (3) average bidder returns are less negative for acquirers if the affected joint venture partners report R&D spending and are in the same line of business as the acquirer. Our estimate of the average loss is $843 million per firm, roughly 3% of the non-targeted firm's pre-announcement equity value. Our evidence suggests a previously unrecognized merger motive in that joint ventures expose a firm's intellectual capital to the risk of expropriation.     

An analysis of the disposition of assets in a joint venture

The final disposition of assets at the conclusion of joint venture arrangements is important to an understanding of the motivation to pursue a joint venture and the wealth created by these collaborations. A comparison between conventional asset sales and asset sales occurring within a joint venture structure shows that the total wealth created is larger if the assets have been under shared control in a joint venture. Our results support the contention that the establishment of a joint venture creates an opportunity for a relationship-based exchange of information that can serve as a mechanism to transfer assets in the presence of a high degree of asymmetric information.     

THE VALUE OF EXPERIENTIAL LEARNING BY ORGANIZATIONS: EVIDENCE FROM INTERNATIONAL JOINT VENTURES

We use a sample of international joint venture announcements to test the hypothesis that organizations learn from experience, such that prior learning enhances the value of later ventures. We find that experience with ventures in the same foreign location, as well as experience with international joint ventures in general, is valued by the market. In contrast, experience in the same type of joint venture activity does not add any incremental value. These findings suggest the market recognizes and values some, although not all, forms of organizational learning.     

The Role of Knowhow Acquisition in the Formation and Duration of Joint Ventures

We analyze the role of knowhow acquisition in the formationand duration of joint ventures. Two parties become partnersin a joint venture to benefit from each other’s knowhow.Joint operations provide each party with the opportunity toacquire part of its partner’s knowhow. A party’sincreased knowhow provides the impetus for the dissolution ofthe joint venture. We characterize the conditions under whichdissolution takes place, identify the party that buys out itspartner, determine the time to dissolution, establish its comparativestatics, and examine the implications of knowledge acquisitionfor the desirability of joint venture formation. (JEL code:G34)     

Using the Balanced Scorecard to Manage Intangible Assets in A Sino-Foreign Joint Venture

The application of the balanced scorecard as a performance measurement tool to convert intangible assets into tangible outcomes is examined using a case study of a Sino-US joint venture — Xinan JV. The balanced scorecard is described in terms of the specific measures that were used to manage various innovation and human resource development processes and initiatives to help the company respond to its strategic challenges. We present some impressions of the managers of the company on how the balanced scorecard facilitated the management of intangibles in the joint venture.     

An empirical study of the value-relevance of using proportionate consolidation accounting for investments in joint ventures

This research examines bond risk premiums to determine whether creditors of companies with investments in joint ventures reflect legal or implicit measures of the debts of joint ventures. The legal view suggests that the amount of potential loss from an investment in a joint venture is limited to the investment. The implicit view suggests that the operations of the joint venture and the venturer are interdependent. Equity method accounting reflects the legal view and proportionate consolidation reflects the implicit view.The study examines whether bond risk premiums are more highly associated with accounting numbers from proportionate consolidation than equity method accounting. The study uses data from 10Ks, the Wall Street Journal, and Moody's Bond Record from May 1, 1995 through April 30, 1998. These 4 years are used because US interest rates were fairly stable during this period, which is an important factor when examining bond risk premiums. Additionally, the companies in the study needed to remain stable across the window of study – no mergers, acquisitions, buy-outs, or liquidations – in order to maintain a comparative sample over the entire time period. The risk premium model uses measures of default that change between equity method accounting and proportionate consolidation. Differences in the explanatory power of the model determine how creditors view the joint venture debts.The study shows that approximately half of equity investments represent investments in joint ventures. Furthermore, the average joint venture uses debt to finance about two-thirds of the assets. The results show that proportionate consolidation fails to improve the explanatory power of the model when examining the entire set of companies that invest in joint ventures. However, the data reject the null hypothesis of no improvement with proportionate consolidation when examining companies who guarantee the debt of their joint venture. The policy implication of this study indicates that a change to proportionate consolidation would provide more value-relevant information to creditors when companies guarantee the debt of the joint venture.     

“达能·娃哈哈”未了局：合资模式的新考验

中国合资企业存在的问题是如此之多，以致外国律师讨论最多的不是如何使合资协议尽可能定得完美，而是除合资外是否已经没有其他经营方式可选择了。     

吸收风险投资对企业投资效率的影响研究--基于创业板的数据研究

以创业板上市公司为研究对象,就初创公司上市后是否吸收风险投资、吸收风险投资的比例以及是否存在风险投资机构的联合投资展开实证研究。结果表明:公司上市后风险投资参与仍可以显著提高企业的投资效率,风险投资比例越高,越有利于提高投资效率,联合投资也对此有正向促进作用。     

The Evidence on Product-Market Diversifying Acquisitions and Joint Ventures by U.S. Banks

We examine the acquisition and joint venture strategies of U.S. banks from 1980 to 1998 to diversify into non-banking sectors. We find that the market responds favorably to both types of expansions, with the gains being shared between acquiring banks and their targets and venture banks and their non-bank partners, respectively. Acquisitions expose acquiring banks to significant increases in nonsystematic, market, and total risk, while joint ventures result in significant decreases in the nonsystematic and total risk measures for participating banks. Our results suggest that product-market expansions, in general, provide U.S. banks with value-enhancing opportunities, and that joint ventures may improve both the return and risk characteristics of the partner banks.     

联合风险投资网络能提升企业投资效率吗——基于创业板数据的PSM回归分析

随着创业投资领域风险投资人的广泛引入,联合风险投资对企业投资效率的影响受到关注.利用2011-2015年5年间中国创业板相关联合风险投资和企业投资效率数据,基于资源基础观理论,利用PSM估计,实证分析了联合风险投资对企业投资过度和投资不足的不同影响作用,进而分析了行业层面和风险投资人层面不同调节变量的调节作用,并据此提出了相关的政策和企业战略建议     

The impact of technology-motivated M&A and joint ventures on the value of IT and non-IT firms: a new examination

We extend Lee and Lim (Rev Quant Financ Account 27:111–123, 2006) who provide empirical evidence on the impact of mergers and acquisitions (M&As) and joint ventures on the value of information technology (IT) and non-IT firms. Using technology-motivated transactions, we examine whether there are differences in market response to the announcement of M&As and joint ventures, and we consider the long-term performance of such firms. We find the market provides no (positive) reaction to joint ventures (M&As) at the announcement. We also present new evidence suggesting the market reacts more favorably to the announcement of technology M&As relative to joint ventures for our full sample, IT sample and non-IT sample. However, our examination of these firms’ long-term performance suggests the initial reaction is not fully supported. The findings suggest improved (declining) operating performance for joint venture (M&A) firms, and evidence to conclude joint venture firms achieve superior long-term performance changes for both accrual- and cash-based measures. To explain these inconsistencies, we employ a set of control variables previously documented as determinants of the innovation ownership decision. For joint venture firms, we find that, while the market fails to consider the importance of the firms’ R&D intensity and growth prospects in its initial reaction, these are ultimately key indicators of their future performance. The evidence also suggests the market overreacts to M&A announcements because it over-weights the impact of R&D intensity on the firms’ future performance in its initial response.     

Accounting for Joint Ventures and Associates in Canada, UK, and US: Do US Rules Hide Information?

Abstract:   Unlike US GAAP, accounting principles in Canada and the UK require disclosure of disaggregated components of joint ventures and associates. Using comparative analysis of Canadian, UK and US data, this study investigates the potential loss of forecasting and valuation relevant information from aggregating joint venture and associate accounting amounts. Findings show that aggregating joint venture and associate investment numbers, and aggregating joint venture revenues and expenses, each leads to loss of forecasting and valuation relevant information. Thus, current US accounting principles likely mask information that financial statement users could use to predict future earnings and explain share prices.     

Bankruptcy spillover effects on strategic alliance partners

This paper examines whether a party to a strategic alliance or joint venture suffers from spillover effects when the other partner files for bankruptcy. We find that the non-bankrupt strategic alliance partners, on average, experience a negative stock price reaction around their partner firm's bankruptcy filing announcement. This negative effect is strongest for longer partnerships and those with higher returns at the announcement of the initial alliance formation. Furthermore, horizontal alliance firms in declining industries have lower returns, indicating that industry conditions can exacerbate expected problems for the non-bankrupt firm. Non-bankrupt partners also experience drops in profit margins and investment levels in the subsequent two years with the worst performance concentrated among the longer-term agreements. There is very little impact on the returns or performance for joint venture partners, which suggests that these agreements are more insulating for the partner firm.     

Developing Dividend and Financing Policies with a Computer Terminal

This study examines the value relevance of mandated disclosures by UK firms of the investor‐firm share of liabilities of equity‐accounted associate and joint venture investees. It does so for the six years following the introduction of FRS 9: Associates and Joint Ventures, which forced a substantial increase in such disclosures by UK firms. Since the increased disclosure requirements were partly motivated by concern that single‐line equity accounting concealed the level of group gearing, and in light of previous US results, it is predicted that the mandated investee‐liability disclosures have a negative coefficient in a value‐relevance regression. The study also examines whether value‐relevance regression coefficients on investee‐liability disclosures are more negative for joint ventures than for associates and whether they are more negative in the presence of investor‐firm guarantees of investee‐firm obligations than in the absence of such guarantees. The study reports that the coefficient on all investee‐liability disclosures taken together has the predicted negative sign, and is significantly different from zero. It finds little evidence that the negative valuation impact of liability disclosures is stronger for joint venture investees overall than for associate investees overall, or stronger for guarantee cases overall than for non‐guarantee cases overall. There is, however, some evidence that the impact for joint venture guarantee cases is stronger than that for joint venture non‐guarantee cases and stronger than that for associate guarantee cases.     

Corporate Combinations and Common Stock Returns: The Case of Joint Ventures

The gain to stockholders from mergers is well documented. However, there is little evidence as to whether the source of the gain is due to synergy or management displacement. Merger is just one of an almost limitless variety of ways in which firms combine resources to accomplish some objective. A joint venture is another. In addition to being of interest as an independent phenomenon, because the original managements of the parent firms remain intact under a joint venture, investigation of wealth gains from joint ventures provides an opportunity to isolate the management displacement hypothesis from the synergy hypothesis as the source of gains in corporate combinations. Our results are 1) there are significant wealth gains from joint ventures, 2) the smaller partner earns a larger excess rate of return while the dollar gains are more equally divided, and 3) the gains, scaled by resources committed, yield “premiums” similar to those in mergers. We are inclined to interpret our results as supportive of the synergy hypothesis as the source of gain from corporate combinations.     

What makes a joint venture: Micro‐evidence from Sino‐Italian contracts

This paper provides new contract-level evidence on control rights allocation in order to define what makes a joint venture. Property rights theory of the firm identifies circumstances under which joint control alleviates investment distortions due to contract incompleteness. We compare predictions of the theoretical literature with actual governance structures of Sino-Italian joint ventures, as reported in a questionnaire submitted to the entire population of Italian enterprises operating in China. With an exceptional response rate of 60%, our evidence confirms most of the theoretical predictions and helps select among competing approaches to model joint ventures.     

2006～2009:我国中资与外(合)资保险公司经营效率的比较研究

2011年是中国加入WTO十周年.十年来,我国保险业对外开放程度明显提高,保险业步入了快速发展的黄金时期.截至目前,我国共有外(合)资保险公司46家,世界上主要的跨国保险金融集团和发达国家的保险公司已经基本进入我国.2009年,我国外(合)资保险公司保费收入458.02亿元,与加入WTO前相比增长了约4.7倍.本文选择...     

对国有投资控股或参股公司进行审计的研究

随着现代企业制度的发展,各类企业为增强企业实力,引入了国有、民营、私人及国外战略投资,组建上市或非上市股份制控股或参股公司,产权结构日趋多元化。合资公司或多或少存在着控制乏力、管理薄弱的问题,如何实施对这类公司的监管,特别是从内部审计的角度如何介入,以维护投资方的利益,实现投资目的,是一个亟待解决的课题。本文拟对合资公司实施内部审计的必要性,内部审计的内容以及应注意的问题和对策,进行初步的探讨。     

Foreign VCs and venture success: Evidence from China

This paper analyzes the role of foreign VCs in driving venture success in emerging markets. We analyze a comprehensive data set of 4753 portfolio companies from China. We test whether the presence of a foreign VC increases the likelihood that a portfolio company is successfully exited. We find that the presence of a foreign VC does not per se significantly increase the likelihood of a successful exit. However, the likelihood of a successful exit increases if the foreign VC collaborates with a joint venture (JV) partner. Further, the impact of foreign VC backing depends on the nature of the VC, with foreign VCs tending to perform better when investing in late-stage companies and when they are diversified across industries. If a foreign VC successfully exits an investment, then, compared with a domestic-VC, it prefers to exit via a M&A or secondary-buyout than via an IPO, reflecting the significant lock-up periods associated with VC-backed IPOs in China, the difficulty of achieving a foreign listing, and the difficulty listing a start-up on Chinese markets.