Author Identifier (ORCID)
Zhaoyong Zhang: https://orcid.org/0000-0001-9596-2648
Abstract
Purpose – This study empirically examines how industrial diversification and partner business relatedness influence shareholder value, focusing on US multinational enterprises’ (MNEs) worldwide joint venture (JV) announcements, with particular emphasis on East Asian economies. Design/methodology/approach – Drawing on theories from finance, strategic management and international business, we apply a standard event study methodology and employ three parametric and nonparametric tests (i.e. the Patell Z-test, the rank test and the generalized sign test) to assess the impact. We calculate abnormal returns (ARs) as the difference between actual and expected returns and average them across firms to obtain the average AR for each day in the [−10, +10] window, thereby capturing potential information leakage before JV announcement and delayed market reactions afterward (Brown and Warner, 1985; Fama, 1998). Findings – We find robust evidence of a diversification premium, confirming that diversification through IJVs increases shareholder value for US partners and partnering with businesses in unrelated industries can amplify the value gains from diversification. Practical implications – The findings suggest that IJVs can be a more effective entry mode than acquisitions or greenfield investments when MNEs expand into non-core business areas, offering strategic guidance for both investment mode choice and partner selection. Social implications – Our findings have important implications for firms’ investment mode and partner selection decisions when they expand internationally. Originality/value – To the best of our knowledge, this study is among the first to systematically investigate the combined effects of industrial diversification and partner business relatedness on shareholder value in the context of US firms undertaking IJV investments in East Asian economies.
Document Type
Journal Article
Date of Publication
1-1-2025
Publication Title
Journal of Asian Business and Economic Studies
Publisher
Emerald
School
School of Business and Law
RAS ID
85686
Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 License.
First Page
1
Last Page
12
Comments
Ho, K., Zhang, Z., & Zhou, L. (2025). IJV announcements and shareholder value creation: Do industrial diversification and relatedness matter? Journal of Asian Business and Economic Studies, 32(4), 240–251. https://doi.org/10.1108/JABES-05-2025-0242