Abstract

This study presents international evidence by examining the wealth effect of minority equity participation in strategic alliances by Taiwanese firms. Consistent with United States evidence, we find that announcements of strategic alliances by Taiwanese firms are, on average, associated with significantly positive abnormal stock returns. We also find that the stock market response to alliances with minority equity investment is significantly larger than the pure contract agreements. These findings hold even after controlling for other potential explanatory variables. Therefore, the result of this study provides important evidence that equity participation in inter-firm collaboration is important in reducing the opportunistic behavior and aligning partnering firms ’ interests. This study makes a valuable contribution to the literature by documenting the first direct evidence of the wealth effect of equity participation in strategic alliances. JEL classification: G14; G32

Citations