Abstract
AbstractThis study investigates the formation of international joint ventures into emerging markets and the corresponding implications to shareholder wealth. Empirical evidence from this study reveals that formation of international joint ventures into emerging markets are value enhancing for shareholders. The formation of international joint ventures increases firm value by more than 1%, on average. This study also investigates two important factors for their influence on the market's assessment of the joint venture formation—the complexity of the joint venture and the political risk of the host country. Evidence in this study reveals that less complex ventures into emerging markets reap significantly greater shareholder wealth effects relative to more complex ventures. Evidence also reveals that shareholders receive a risk premium for accepting greater political risk. In addition to understanding the ramifications of international joint venture formation, this study has relevance for managers' site selection decisions when considering venture complexity and the political risk of emerging markets.
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