Bankruptcy spillover effects on strategic alliance partners

Do joint ventures and strategic alliances create value for bondholders?

“…Real options are especially valuable when potential investments are in an industry with intense competition or significant uncertainty regarding profitability. Furthermore, we find little evidence that the alleviation of financial constraints benefits bondholders, while the literature suggests that it explains shareholder returns (Boone and Ivanov, 2012). Lastly, we find positive shareholder reactions, which are consistent with the current literature.…”

“…A survey by Campello et al (2010) indicates that financially constrained firms tend to reduce investment in technology, employment, and capital spending during crisis periods. Boone and Ivanov (2012) suggest that one of the main benefits of JV and SA for participating firms is alleviation of their financial constraints. Johnson and Houston (2000) find that firms choose vertical JV when their suppliers face severe financial constraints.…”

“…We employ multiple databases in this research, starting with SDC, which provides data used in recent empirical studies of cooperative activities (Bodnaruk et al, 2013;Boone and Ivanov, 2012;Fang et al, 2012). Following Lindsey (2008), we identify a cooperative strategy as an equity-linked organization (joint ventures) or a contract-linked arrangement (strategic alliances).…”

Input Specificity and the Propagation of Idiosyncratic Shocks in Production Networks *

“…Recent studies have found evidence of comovement in stock returns within production networks (Cohen and Frazzini 2008;Hertzel et al 2008;Menzly and Ozbas 2010;Ahern 2012;Boone and Ivanov 2012;Kelly, Lustig, and Van Nieuwerburgh 2013). Our results, which emphasize the importance of input complementarity and switching costs, provide a foundation for this comovement.…”

CEO Turnover–Performance Sensitivity in Private Firms

“…We match each CEO turnover event firm to a control firm following Boone and Ivanov (2012). We first identify a group of firms with no CEO turnover in the same Fama and French (1997) 48 industries whose sales in year 0 are within [50%, 150%] of the sales of the turnover firm.…”