Aaltodoc publication archive (Aalto University institutional repository)
School of Business | Department of Finance | Finance | 2013
Thesis number: 13386
Strategic alliances and firm value creation in China
|Title:||Strategic alliances and firm value creation in China|
|Year:||2013 Language: eng|
|Department:||Department of Finance|
|Index terms:||rahoitus; financing; strategia; strategy; yhteistyö; cooperation; yrityksen arvo; company valuation; Kiina; China|
» hse_ethesis_13386.pdf size:2 MB (1186129)
|Key terms:||strategic alliance, abnormal return, firm value, Chinese characteristics|
This study investigates the impact of 306 strategic alliances on the increment of firm value in the case of China. I apply the event study methodology using OLS market model to examine the abnormal returns of sample firms. The results show that the announcements of strategic alliance in China generate significant positive average abnormal return on the announcement date (0.96%) which reaches 1% significance level, suggesting a sizable increment in firm value by the formation of strategic alliance.
The findings referring to alliance-specific characteristics are as follows: The abnormal return for firms entering policy alliance with local governments is significantly higher than the average level of abnormal return of total alliances (1.60% for policy alliances compared with 0.96% for the overall alliances on the announcement date). More specifically, the higher one government is indexed in Chinese administrative ranking, the higher abnormal return its partnering firm can achieve. As for financing alliance, the results provide evidence that the abnormal return of private firms (1.02%) is much greater than the abnormal return of state-owned enterprises (0.25%). Furthermore, there are no significant differences for abnormal returns between domestic alliances and international alliances.
On considering the impact of firm-specific characteristics, the results indicate that the firm value increment by strategic alliance announcements has an inverse relationship with firm size but does not show any correlation with firm's growth opportunity. Contrast to the cases of firms in developed countries, the strategic alliances to low-tech companies contribute to increasing firm value more than the alliances to high-tech do (0.74% compared to 1.11% on the announcement date) in China. In addition, this study shows further evidence that for the firms involving alliances, the average abnormal return for private firms collaborating with state-owned partners reaches 1.15%, which is significantly positive at 1% level.
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