Implications of strategic alliances for earnings quality and capital market investors

Sebahattin Demirkan and Irem Demirkan

Journal of Business Research, 2014, vol. 67, issue 9, 1806-1816

Abstract: Strategic alliances are well-established organizational forms and a means of strategy implementation. Despite their growing pervasiveness in the economy, existent literature provides few insights about earnings quality of strategic alliances. This challenge is especially severe in contractual alliances (CAs), where firms do not form a new corporate entity that is separate from the parent organization in comparison to joint ventures (JVs). We investigate how earnings attributes differ depending on involvement in strategic alliances of 8137 CAs and 3026 JVs spanning 1997–2007. We find, in particular, that earnings attributes of firms involved in contractual alliances are broadly reflective of low underlying accounting quality. Relative to JV firms and non-alliance (NA) firms, they have higher levels of discretionary accruals, lower accrual quality, and earnings that are less persistent, less smooth, less relevant, less timely, and less conservative. They also have lower earnings response coefficients.

Keywords: Strategic alliances; Earnings attributes; Capital market response; Voluntary disclosure; Explanatory approach (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbrese:v:67:y:2014:i:9:p:1806-1816

DOI: 10.1016/j.jbusres.2013.12.009

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