Essays on Corporate Alliances

Abstract

This thesis consists of three essays investigating the role of corporate alliances in changing firms’ boundaries. Chapter 2 provides novel evidence showing that shareholder litigation risk influences firms’ choice of external growth strategies. Using staggered adoption of the universal demand (UD) laws, I find that firms under the threat of litigation tend to choose corporate alliances over mergers and acquisitions (M&As). Moreover, the impact is more pronounced for the firms with higher financial constraints and lower managerial risk-taking incentives. This finding supports the view that alliances offer a low-risk, low-cost alternative to M&As for firms facing litigation risk.

Chapter 3 investigates how shareholder litigation risk influences the performance of corporate alliances. I find alliance participants experience better short-term and long-term performance when forming alliances after the adoption of UD laws. Moreover, the positive impact of UD laws on alliance performance is more pronounced for dominant partners in risky deals, or for partners with more financial constraints. Overall, my results suggest that weakened shareholder litigation risk improves managerial decision making on corporate alliance.

Chapter 4 provides novel evidence that state-owned enterprises (SOEs) engage in international alliances to achieve their national and economic goals. I show that country-level political and economic factors (e.g., autocracy, institutional environment, foreign ownership restrictions, foreign currency reserve, and industry composition) influence SOEs’ decisions on cross-border alliances. Moreover, international firms tend to collaborate with local SOEs when there is a high expropriation risk and a state-dominated banking system in the host country. These international firms, especially financially constrained ones, experience higher announcement returns when allying with SOEs rather than non-SOEs, suggesting that the exclusive benefits from SOEs might be value-creating for the international alliance partners.

Date of Award	25 Jan 2022
Original language	English
Awarding Institution	University of Bristol
Supervisor	Fangming Xu (Supervisor) & Neslihan Ozkan (Supervisor)