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Information asymmetry and international strategic alliances

Sian Owen and Alfred Yawson

Journal of Banking & Finance, 2013, vol. 37, issue 10, 3890-3903

Abstract: This paper examines how information asymmetry affects cross-border strategic alliance formation by US firms over the period 2000–2008. We construct a measure, information costs, based on both geographical distance and the proportion of worldwide GDP the partner’s home country represents. Consistent with our expectations, we find an inverse association between information costs and cross-border strategic alliances. When considering the proportion of alliances formed with publicly quoted overseas partners, we find this is unaffected by the level of information costs but rather the level of stock market development, tax rate and general economic conditions. Information costs are, however, significantly negatively related to alliances with overseas private organizations. Our results offer clear support for the on-going importance of information asymmetry in corporate decision making.

Keywords: Information costs; Cross-border transactions; Strategic alliances; Gravity model (search for similar items in EconPapers)
JEL-codes: G32 G34 (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:37:y:2013:i:10:p:3890-3903

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