National Culture and Governance on Bondholder Wealth: Evidence from Joint Ventures and Strategic Alliances around the World

Jun Chen (), Tao-Hsien Dolly King and Xinxin Li
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Jun Chen: Department of Accounting, Finance and Information Systems, College of Business, North Dakota State University, 811 2nd Ave N, Fargo, ND 58108, USA
Tao-Hsien Dolly King: Department of Finance, Belk College of Business, University of North Carolina at Charlotte, 9201 University City Blvd., Charlotte, NC 28223, USA
Xinxin Li: Department of Finance, Belk College of Business, University of North Carolina at Charlotte, 9201 University City Blvd., Charlotte, NC 28223, USA3Department of Finance and International Business, School of Business, Ithaca College, 953 Danby Road, Ithaca, NY 14850, USA

Quarterly Journal of Finance (QJF), 2018, vol. 08, issue 01, 1-52

Abstract: This paper examines bondholder wealth effects in global business collaborations with the form of cross-border joint ventures (JVs) and strategic alliances (SAs). Based on a sample of 1,898 event-firms from 2009 to 2015, we find significant and positive abnormal returns for bondholders. On average, bondholder value increases 14.4 basis points in a 3-month observation window. We find that country-level governance and national culture are dominant drivers of bondholder wealth effects. More specifically, bondholders benefit more from JVs and SAs if they are from countries with poorer institutional governance or greater regulatory governance in creditor protection (higher creditor rights and lower shareholder rights). In addition, bondholders gain more when they are from countries characterized with greater individualism, less power distance, a higher level of trust, or larger culture distance. Robustness tests and subsample analyses confirm the main findings. We find a positive impact of JVs and SAs on stockholder wealth, but little evidence for wealth transfer between stockholders and bondholders.

Keywords: Joint ventures; strategic alliances; bondholders wealth; national culture; country governance (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1142/S2010139218400037

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