Why Manufacture Offshore? An Empirical Analysis of Valuation Effects
In this study, announcements by U.S. firms of offshore joint venture manufacturing during the 1980s are used to provide more comprehensive evidence than past studies on the wealth effects of offshore joint ventures. Evidence shows that the target country's level of economic development and poli...
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Published in | The Financial review (Buffalo, N.Y.) Vol. 32; no. 3; pp. 477 - 499 |
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Main Authors | , , |
Format | Journal Article |
Language | English |
Published |
Oxford, UK
Blackwell Publishing Ltd
01.08.1997
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Subjects | |
Online Access | Get full text |
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Summary: | In this study, announcements by U.S. firms of offshore joint venture manufacturing during the 1980s are used to provide more comprehensive evidence than past studies on the wealth effects of offshore joint ventures. Evidence shows that the target country's level of economic development and political stability, currency strength of the originating country (U.S. in this study) relative to that of the target country, U.S. firm's mode of entry, and the relative value of the U.S. firm's investment in the joint venture affect the wealth of U.S. firms which engage in offshore joint ventures. The target country's level of economic development, its political stability, and the currency strength of the originating country relative to the target country are shown to be the dominant economic factors. Of particular importance, evidence indicates that the target country's level of economic development is a more important determinant of excess returns than is its political stability. |
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Bibliography: | istex:B229CF66D3C7CC4AE86497E7DFC9D3230757590A ark:/67375/WNG-TL1SMXVT-M ArticleID:FIRE477 We are grateful for discussions and comments from Muhammad Q. Islam, Kirk Philipich, Tom Ross, Chih‐Chiang Fang, and Ananth Seetharaman. We acknowledge the important suggestions on earlier drafts of this paper by anonymous referees of this journal. |
ISSN: | 0732-8516 1540-6288 |
DOI: | 10.1111/j.1540-6288.1997.tb00435.x |