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AGENCY COSTS AND THE PERFORMANCE IMPLICATIONS OF INTERNATIONAL JOINT VENTURE INTERNALIZATION
Author(s) -
REUER JEFFREY J.,
MILLER KENT D.
Publication year - 1997
Publication title -
strategic management journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 11.035
H-Index - 286
eISSN - 1097-0266
pISSN - 0143-2095
DOI - 10.1002/(sici)1097-0266(199706)18:6<425::aid-smj878>3.0.co;2-#
Subject(s) - joint venture , international joint venture , agency (philosophy) , internalization theory , business , joint (building) , agency cost , internalization , economics , industrial organization , business administration , finance , engineering , sociology , transaction cost , corporate governance , genetics , biology , cell , shareholder , architectural engineering , social science
Recent studies have examined the determinants of international joint venture (IJV) formations and stock market reactions to such investments. Less is known, however, about the evolution of IJVs and the attendant performance implications for parent firms. This paper examines one specific type of IJV evolution, IJV internalization, whereby one firm acquires the IJV by buying out its partner(s). Standard agency theory variables are hypothesized to influence parent firm valuation effects. The results indicate that parent firm valuation effects are positively related to the parent firm equity owned by insiders and the interaction of debt financing and free cash flow. © 1997 by John Wiley & Sons, Ltd.