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Testing of the Positive-Multinational Network Hypothesis: Wealth Effects of International Joint Ventures in Emerging Markets

Author

Listed:
  • Larry J. Prather

    (East Tennessee State University, U.S.A.)

  • Jae Hoon Min

    (Seowon University, Korea)

Abstract

This article examines announcement effects of 240 international joint ventures undertaken by firms to ascertain their impact on shareholders' wealth. The positive-multinational-network hypothesis suggests that the market reaction should be related to the option value of the venture. To test the positive-multinational-network hypothesis, first the market reaction between ventures into developed and less-developed countries are contrasted. Then, the reaction between ventures that form the basis for initial operations in a country and subsequent operations are contrasted. Results indicate that venture-specific characteristics influence announcement effects and that the positive-multinational-network hypothesis is supported.

Suggested Citation

  • Larry J. Prather & Jae Hoon Min, 1998. "Testing of the Positive-Multinational Network Hypothesis: Wealth Effects of International Joint Ventures in Emerging Markets," Multinational Finance Journal, Multinational Finance Journal, vol. 2(2), pages 151-165, June.
    • Handle: RePEc:mfj:journl:v:2:y:1998:i:2:p:151-165
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    References listed on IDEAS

    as
    1. McConnell, John J & Nantell, Timothy J, 1985. "Corporate Combinations and Common Stock Returns: The Case of Joint Ventures," Journal of Finance, American Finance Association, vol. 40(2), pages 519-536, June.
    2. Haiyang Chen & Michael Y. Hu & Joseph C. P. Shieh, 1991. "The Wealth Effect of International Joint Ventures: The Case of U.S. Investment in China," Financial Management, Financial Management Association, vol. 20(4), Winter.
    3. Brown, Stephen J. & Warner, Jerold B., 1985. "Using daily stock returns : The case of event studies," Journal of Financial Economics, Elsevier, vol. 14(1), pages 3-31, March.
    4. Claire Crutchley & Enyang Guo & Robert S. Hansen, 1991. "Stockholder Benefits From Japanese-U.S. Joint Ventures," Financial Management, Financial Management Association, vol. 20(4), Winter.
    5. repec:bla:jfinan:v:43:y:1988:i:5:p:1161-75 is not listed on IDEAS
    6. Lee, Insup & Wyatt, Steve B, 1990. "The Effects of International Joint Ventures on Shareholder Wealth," The Financial Review, Eastern Finance Association, vol. 25(4), pages 641-649, November.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

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    2. Sviatoslav A. Moskalev & R. Bruce Swensen, 2007. "Joint ventures around the globe from 1990–2000: Forms, types, industries, countries and ownership patterns," Review of Financial Economics, John Wiley & Sons, vol. 16(1), pages 29-67.
    3. Moskalev, Sviatoslav A. & Swensen, R. Bruce, 2007. "Joint ventures around the globe from 1990-2000: Forms, types, industries, countries and ownership patterns," Review of Financial Economics, Elsevier, vol. 16(1), pages 29-67.

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    More about this item

    Keywords

    event studies; information and market efficiency; investment policy; joint ventures;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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