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Joint venture investments and the market value of the firm

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  • Edward Jones
  • Jo Danbolt

Abstract

The impact of Joint Venture announcements on the market value of UK listed companies is examined. Based on a sample of 158 announcements of either joint venture formation or joint venture activities, significant positive market-adjusted abnormal returns of 0.5% on the announcement date are observed. Cross-sectional analysis reveals that abnormal returns are significantly lower when undertaken by large companies, or where the project is located in Asia. On the other hand, market-adjusted returns are found to be significantly higher when the project is large compared to the size of the company undertaking the investment, and where the project is either domestic or located within the European Union.

Suggested Citation

  • Edward Jones & Jo Danbolt, 2004. "Joint venture investments and the market value of the firm," Applied Financial Economics, Taylor & Francis Journals, vol. 14(18), pages 1325-1331.
    • Handle: RePEc:taf:apfiec:v:14:y:2004:i:18:p:1325-1331
    DOI: 10.1080/09603100412331313569
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    References listed on IDEAS

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    1. Bruce M. Burton & A. Alasdair Lonie & David M. Power, 1999. "The Stock Market Reaction to Investment Announcements: The Case of Individual Capital Expenditure Projects," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 26(5‐6), pages 681-708, June.
    2. Johnson, Shane A. & Houston, Mark B., 2000. "A Rexamination of the Motives and Gains in Joint Ventures," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 35(1), pages 67-85, March.
    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. Bruce M. Burton & A. Alasdair Lonie & David M. Power, 1999. "The Stock Market Reaction to Investment Announcements: The Case of Individual Capital Expenditure Projects," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 26(5&6), pages 681-708.
    5. Borde, Stephen F. & Whyte, Ann Marie & Wiant, Kenneth J. & Hoffman, Lorrie L., 1998. "New evidence on factors that influence the wealth effects of international joint ventures," Journal of Multinational Financial Management, Elsevier, vol. 8(1), pages 63-77, January.
    6. J. Randall Woolridge & Charles C. Snow, 1990. "Stock market reaction to strategic investment decisions," Strategic Management Journal, Wiley Blackwell, vol. 11(5), pages 353-363, September.
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    Cited by:

    1. Edward Jones & Jo Danbolt, 2005. "Empirical evidence on the determinants of the stock market reaction to product and market diversification announcements," Applied Financial Economics, Taylor & Francis Journals, vol. 15(9), pages 623-629.
    2. Karen C. Denning & Heather Hulburt & Stephen P. Ferris, 2006. "Risk and wealth effects of U.S. firm joint venture activity," Review of Financial Economics, John Wiley & Sons, vol. 15(3), pages 271-285.
    3. Parmjit Kaur & Randeep Kaur, 2019. "Effects of Strategic Investment Decisions on Value of Firm: Evidence from India," Paradigm, , vol. 23(1), pages 1-19, June.
    4. Denning, Karen C. & Hulburt, Heather & Ferris, Stephen P., 2006. "Risk and wealth effects of U.S. firm joint venture activity," Review of Financial Economics, Elsevier, vol. 15(3), pages 271-285.
    5. Chikashi Tsuji, 2006. "Does EVA beat earnings and cash flow in Japan?," Applied Financial Economics, Taylor & Francis Journals, vol. 16(16), pages 1199-1216.

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