VALUATION EFFECTS OF INTERNATIONAL JOINT VENTURES
Abstract
This thesis is a study of the effects of international joint ventures on the market value of participating U.S. firms. The study will be a two pronged investigation. Theoretical analysis will be conducted to determine the conditions under which international joint ventures can be value producing activities in a market equilibrium setting. Secondly, empirical analysis will be performed to determine whether the actual undertaking of international joint ventures by U.S. firms has an effect on their market value. Both the theoretical and empirical analysis will not only look for the existence of valuation effects, but will also search for differences in the valuation effects based on the nationality of the foreign partner, whether the partner is a government or private firm, and the division of ownership interest in the joint venture. As a result of the theoretical analysis, this study develops a general model in which international joint ventures are value producing projects as a result of one or more potential factors. Those potential factors include, but are not restricted to, imperfections in the real goods market, international taxation differentials, and diversification benefits. The empirical findings of this study indicate that in general, participation by a U.S. firm in an international joint venture causes an increase in the firm's market value. The increase in value is significantly higher for joint ventures with foreign firms than it is for joint ventures with governments. An attempt is made to measure the potential diversification benefit to U.S. firms of international joint ventures, based on the nationality of the joint venture partner. The benefit is assumed to be dependent upon the development of the foreign country's capital market, and the correlation between that market and the U.S. market. The empirical results show no evidence that international joint ventures have a diversification benefit to U.S. firms which manifests itself in a market value premium for the firm.
Degree
Ph.D.
Subject Area
Business community
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