Do joint ventures and strategic alliances create value for bondholders?

Tax Knowledge Diffusion via Strategic Alliances

“…Regarded as "lying somewhere in between single-firm activity and spot contracting" (Lindsey, 2008) and presenting increased mutual commitment in comparison to arm's-length market transactions (Chan et al, 1997), strategic alliances further comply with the diffusion requirements proposed by Rogers. Empirical inferences about knowledge diffusion via strategic alliances are usually based on the contracting parties' stock price performance (Boone and Ivanov, 2012;Mohanram and Nanda, 1996;Chen, King, and Wen, 2015;Anand and Khanna, 2000), return on equity, (cash flow) return on assets (Chan et al, 1997;Porrini, 2004) and post-reorganization performance (Cai and Sevilir, 2012;Higgins and Rodriguez, 2006;Ishii and Xuan, 2014;Porrini, 2004). Other scholars apply exploratory approaches by conducting surveys (Dyer and Hatch, 2006) or interviews (Inkpen, 2008).…”

“…With regard to tax planning, cooperation could also induce complexity in the contracting parties' organization and reduce a firm's ability to fine-tune the tax sheltering of its affiliates (Desai, Foley, and Hines, 2004). Additionally, both cooperation (Chen, King, and Wen, 2015) and tax planning are found to increase an organization's uncertainty (Dyreng, Hanlon, and Maydew, 2018). Thus, even prudent managers could expect the marginal disutility of uncertainty to exceed the benefits of acquired tax knowledge.…”

“…As such racing behaviors appear to be mutually reinforcing, common benefits would still be attainable (Khanna, Gulati, and Nohria, 1998). Furthermore, strategic alliances enhance managerial flexibility because the contracting parties are not fully committed to the investment (Chen, King, and Wen, 2015), while Fiol and Lyles (1985) highlight that the probability of learning increases with an organizational structure that allows innovativeness and new insights. Employees who are seconded to a strategic alliance are involved in not only the alliance's business as such but also the monitoring of the alliance and the partner.…”

“…We exploit data on strategic alliances from Securities Data Company's (SDC) Platinum database on strategic alliances over the period 1994-2016. 2 SDC is widely used in relevant research on corporate cooperation (Anand and Khanna, 2000;Boone and Ivanov, 2012;Cai and Sevilir, 2012;Chen, King, and Wen, 2015;Ishii and Xuan, 2014), and its accuracy is generally perceived as very high for most items (Anand and Khanna, 2000). SDC issues data at the strategic alliance level.…”

“…Empirical inferences in such studies are usually based on the contracting parties' stock price performance (Boone and Ivanov, 2012;Mohanram and Nanda, 1996;Chen, King, and Wen, 2015;Anand and Khanna, 2000), return on equity, (cash flow) return on assets (Chan et al, 1997;Porrini, 2004) and post-reorganization performance (Cai and Sevilir, 2012;Higgins and Rodriguez, 2006;Ishii and Xuan, 2014;Porrini, 2004). While firms are often found to benefit from what they learn in alliances in other contexts, not all corporate practices diffuse in the same way (Cai et al, 2014).…”