A hostage theory of joint ventures: why do Japanese investors choose partial over full acquisitions to enter the United States?

Market for Corporate Control and Contractual Buyout (CoBO): A New 'Collective Ownership-and-Administrative' Strategy

“…Conventionally, more than 90 per cent of LBO deals purchase price of an acquisition financed by debt, and the tangible assets of target firm that have been used as collateral for loan amount (Kasparova, 2007;Ray, 2010). Finance researchers may refer for the extensive review on financing LBOs in Russian Federation (Kasparova, 2007), other contributions include Axelson, Strömberg, and Weisbach, 2009;Braun and Latham, 2007;Chaganti and Schneer, 1994;Chen and Hennart, 2004;Cumming et al, 2007;Fishman, 1989;Phan et al, 2009;Prasch , 1992;Schlingemann, 2004;Siegel et al, 2011;Wier et al, 2005;Wright, Robbie, and Thompson, 1989;. Selectively, we recommend the recent studies on methods of payments in asset sales (Slovin, Sushka, and Polonchek, 2005), and the role of collateralized debt obligations in LBOs boom (Shivdasani and Wang, 2011).…”

“…Second, academic contributions on various key issues such as restructuring economies, synergies of alliances, partnerships, M&A, and buyouts in diverse institutional environments notice that acquisition, alliance, collaboration, or buyout alternatives improve corporate growth especially in larger firms (e.g., Elango and Pattnaik, 2011;Fjeldstad et al, 2012;Slangen, 2011;Wang and Zajac, 2007;Wiersema and Liebeskind, 1995). Third, studies on foreign market entry strategies in various societal settings describe that acquisitions, greenfiled investments, and buyouts are important entry modes in emerging nations (e.g., Chen and Hennart, 2004;Harzing, 2002;Hennart and Reddy, 1997;Meyer et al, 2009;Reddy et al, 2014aReddy et al, , 2014bWright et al, 2002). Fourth, increased of awareness, and budding research on corporate entrepreneurship in the last decade report that buyouts create opportunities thus improves financial performance via entrepreneurship mode (e.g., Ragozzino and Reuer, 2010;Zahra, 1991).…”

“…The valuable contributions made by Bowman et al (1999), Bull (1989), Fox and Marcus (1992), Guo et al (2011), Jensen andRuback (1983), Loh (1992), Opler (1992), Reddy (2015aReddy ( , 2015d, Roden and Lewellen (1995), Shivdasani andWang (2011), Wright andBuck (1992), Wright et al (1994), Wright et al (2000), and helped as deep-seated pedestal to supply this well-structured theoretical framework for protecting the government, and sick companies on the initiative stones laid in the U.S., for example, RJR leveraged buyout by KKR & Co (e.g., Dalton, 1989;Landsman et al, 2002), smaller company LBOs (Malone, 1989), role of buyouts in restructuring Central and Eastern Europe , partial mergers in Japan (Park and Russo, 1996;Ushijima, 2010), partial acquisitions by Japanese firms in the U.S. (Chen and Hennart, 2004), LBO transactions in the Russian Federation (Kasparova, 2007), and industrial diversification and partial privatization (Lin and Su, 2008). Recently, Amess and Wright (2012) analyze the employment effects of PE-backed and non-PE-backed LBOs.…”

“…A query raised by Chen and Hennart (2004), state that partial acquisitions create a hostage effect that compose likely ex ante selection of targets and ex post enforcement of deals .…”

“…Therefore, CoBO -a policy framework has developed on the foundations laid via the existence of partial mergers in Japan (e.g., Akhigbe, Madura, and Spencer, 2004), LBO transactions in the Russian Federation (Kasparova, 2007), motivations for leveraged buyouts (Opler and Titman, 1991), role of buyouts in restructuring Central and Eastern Europe (Wright, Filatotchev, and Buck, 1993), consequences of LBOs (Bull, 1989;Fox and Marcus, 1992;Krause, 1989), buyout decisions in the UK (Weir, Lating, and Wright, 2005), and board structure and value creation in buyouts (Barun andLatham, 2007, 2009). Exclusive studies include hostage theory of joint ventures and partial acquisitions (Chen and Hennart, 2004), and employment effects and smaller LBOs (Amess and Wright, 2012). We then state our contribution to the study.…”