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Corporate Equity Ownership, Strategic Alliances, and Product Market Relationships

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  • Jeffrey W. Allen

    (Edwin L. Cox School of Business, Southern Methodist University,)

  • Gordon M. Phillips

    (Robert H. Smith School of Business, University of Maryland)

Abstract

This paper examines long-term block ownership by corporations and performance changes in firms with corporate block owners. We also examine potential reasons for corporate ownership including benefits in product market relationships, alleviation of financing constraints, and board monitoring by corporate owners. We find the largest significant increases in targets' stock prices, investment, and operating profitability when ownership is combined with alliances, joint ventures, and other product market relationships between purchasing and target firms, especially in industries with high research and development. Our findings are consistent with the conclusion that block ownership by corporations has significant benefits in product market relationships. Copyright The American Finance Association 2000.

Suggested Citation

  • Jeffrey W. Allen & Gordon M. Phillips, 2000. "Corporate Equity Ownership, Strategic Alliances, and Product Market Relationships," Journal of Finance, American Finance Association, vol. 55(6), pages 2791-2815, December.
  • Handle: RePEc:bla:jfinan:v:55:y:2000:i:6:p:2791-2815
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