What Do Investors Care about in Strategic Alliances? An Empirical Study in the US and Japan

Abstract

This study investigates investor concerns in the formation of strategic alliances, specifically concerns regarding opportunistic behavior and partner capabilities at the announcement of the alliance. Consistent with prior studies, our results show that both two partners gain in terms of abnormal returns and firm size, but that these benefits disappear within few days following the announcement, indicating that the market takes a dim view of alliances between large companies. The results suggest that investors are mostly concerned with short-term gains from speculation, rather than the ability of the alliance to increase long-term value.