Semester

Summer

Date of Graduation

2005

Document Type

Dissertation

Degree Type

PhD

College

Chambers College of Business and Economics

Department

Economics

Committee Chair

Ashok B Abbott

Abstract

A joint venture is established when two or more firms pool their resources to achieve some objective under the combined management of the parent companies. Joint ventures are an increasingly common and important type of cooperative strategy in today's dynamic markets. The synergy hypothesis states that joint ventures are formed to create synergies resulting from sharing complementary skills and resources and stock markets should react positively to joint venture announcements. Joint ventures are also established to share risk to overcome uncertainty in demand and technology. Previous literature on joint ventures is drawn from the welfare effects of joint ventures. However, there has been a little amount of study on both risk and welfare effects of joint venture announcements on shareholder's wealth. For that reason, this dissertation is entirely dedicated to fill this existing gap in joint venture literature.;In chapter 1, the "standard event study" technique based upon the market model is used to examine the risk, diversification and return effects of domestic joint venture announcements. Total risk is partitioned into systematic risk and unsystematic risk.;Chapter 2 aims at finding empirical evidence for the relative size hypothesis in joint venture announcements involving only two firms that differ in their sizes for the period of 1981 to 2002. Market capitalization and abnormal returns based on the market model methodologies are utilized. Each firm in the sample is categorized as "small", "medium" or "large" firm based upon its market capitalization.;Chapter 3 studies the impact of industry concentration on the choice of expansion mode between joint ventures and IPOs. The literature related to this study can be partitioned into two groups. The first group focuses on the ownership choice between JV and wholly-owned subsidiary modes of entry. On the other hand, the second group studies the effects of IPO announcements on rival firms within the same industry. However, there has not been any study on the choice of expansion mode between joint ventures and IPOs under different degrees of industry concentration. For this, two different hypotheses are developed and tested: The first hypothesis states that when target industry is highly concentrated, the preferred mode of expansion should be join venture. The second hypothesis states that when negative competitive effects are stronger than positive information effects, IPO firms will choose highly concentrated industry. (Abstract shortened by UMI.).

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