Tobin's q,agency conflicts,and differential wealth effects of international joint ventures |
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| Institution: | 1. Federal Financial Supervisory Authority of Germany (Bundesanstalt für Finanzdienstleistungsaufsicht — BaFin), Marie-Curie-Straße 24-28, 60439 Frankfurt am Main, Germany;2. Frankfurt School of Finance & Management, Accounting Department, Sonnemannstr. 9-11, 60314 Frankfurt am Main, Germany;1. Department of Economics and Quantitative Methods, Westminster Business School, University of Westminster, London NW1 5LS, UK;2. Department of Economics, Lancaster University Management School, Lancaster LA1 4YX, UK |
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| Abstract: | This article examines announcement effects of 240 international joint ventures (IJVs) undertaken by US firms to ascertain their impact on shareholders' wealth. The objective is to ascertain whether the mixed results of announcement effects reported in the literature can be explained. Theory suggests that IJVs would result in differential stock price reactions due to firm-specific characteristics. Therefore, it is hypothesized that IJVs would elicit a positive stock price reaction, on average. Also, it is hypothesized that this reaction should be greater for high Tobin's q firms and for low free cash flow firms. Empirical analysis reveals that firm-specific characteristics do influence announcement effects and suggests that these factors may explain the mixed announcement effects documented in the literature. |
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