MINORITY EQUITY INVESTMENTS AND INTER-FIRM COLLABORATIONS

Abstract

We examine the benefits for firms participating in collaborations funded via minority equity placements. Selling firms, on average, realize significant increases in share value – strongly correlated with the size of the equity stake, its beta, and the relatedness of the two firms (by industry). Shares of purchasing firms, though, show neutral responses on average (but positive response for R&D intensive alliances). Further, purchasing firms have better financial performance than their industry peers in the years surrounding the announcement (suggesting, unlike joint ventures, that poor performance is not their motivation). Selling firms, however, may be motivated by poor operating performance.

Citation

Han Chan, S., Kensinger, J.W., Keown, A.J. and Martin, J.D. (2005), "MINORITY EQUITY INVESTMENTS AND INTER-FIRM COLLABORATIONS", Research in Finance (Research in Finance, Vol. 21), Emerald Group Publishing Limited, Leeds, pp. 17-44. https://doi.org/10.1016/S0196-3821(04)21002-4