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Insider trading and the valuation of international strategic alliances in emerging stock markets

Author

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  • Stewart R Miller

    (The University of Texas at San Antonio, San Antonio, TX, USA)

  • Dan Li

    (Indiana University, Bloomington, IN, USA)

  • Lorraine Eden

    (Texas A & M University, College Station, TX, USA)

  • Michael A Hitt

    (Texas A & M University, College Station, TX, USA)

Abstract

Because stock markets in emerging economies are relatively new, under-regulated, and often segmented, investors' responses to public announcements by firms in these economies may differ from responses in developed economies' stock markets. We draw on the institutional and corporate governance literatures to explain investor reactions to announcements of international strategic alliances (ISAs) between foreign and emerging-market firms. We argue that emerging economies' stock markets positively value ISAs; however, information leakages due to weak regulatory environments siphon off the “good news” before the ISA announcement date. The level of state ownership of publicly traded firms and the nationality of foreign partners both affect the size and timing of market reactions. Journal of International Business Studies (2008) 39, 102–117. doi:10.1057/palgrave.jibs.8400322

Suggested Citation

  • Stewart R Miller & Dan Li & Lorraine Eden & Michael A Hitt, 2008. "Insider trading and the valuation of international strategic alliances in emerging stock markets," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 39(1), pages 102-117, January.
  • Handle: RePEc:pal:jintbs:v:39:y:2008:i:1:p:102-117
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    Cited by:

    1. Madura, Jeff & Marciniak, Marek, 2014. "Bidder country characteristics and informed trading in U.S. targets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 29(C), pages 256-284.
    2. Barros, Henrique M., 2011. "The Effects of Innovation Partnership, Foreign Ownership and Enhanced Management Practices on the Use of Patents in Brazilian Manufacturing," Insper Working Papers wpe_255, Insper Working Paper, Insper Instituto de Ensino e Pesquisa.
    3. Rao-Nicholson, Rekha & Ayton, Julie (Salaber), 2016. "Euphoria in financial markets: How Indian companies generate value in their cross-border acquisitions," Research in International Business and Finance, Elsevier, vol. 38(C), pages 494-508.
    4. Pollitte, Wesley A. & Miller, Joseph C. & Yaprak, Attila, 2015. "Returns to US firms from strategic alliances in China: A knowledge-based view," Journal of World Business, Elsevier, vol. 50(1), pages 144-148.
    5. Michael A. Hitt & Tiago Ratinho, 2011. "The Multifaceted Effects of Institutions on Firm Strategies and Entrepreneurial Actions," Chapters,in: The Nature of the New Firm, chapter 4 Edward Elgar Publishing.
    6. Li, Dan & Miller, Stewart R. & Eden, Lorraine & Hitt, Michael A., 2012. "The Impact of Rule of Law on Market Value Creation for Local Alliance Partners in BRIC Countries," Journal of International Management, Elsevier, vol. 18(4), pages 305-321.

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