Evidence on Value Creation in the Financial Services Industries through the Use of Joint Ventures and Strategic Alliances

Authors: Gleason K.C.¹; Mathur I.²; Wiggins III R.A.¹

Source: The Financial Review, Volume 38, Number 2, May 2003 , pp. 213-234(22)

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Abstract:

While an extensive body of literature has examined merger, acquisition, and consolidation activity in commercial banks and other financial services firms, little attention has been paid to examining how these institutions use the cooperative activities of joint ventures and strategic alliances to accomplish their growth objectives. We analyze the effects of the use of joint ventures and strategic alliances by a sample of firms in the banking, investment services, and insurance industries. Our results show that commercial banks, investment services firms, and insurance companies experience significant abnormal returns of 0.66% on average when they announce their participation in a joint venture or strategic alliance. These abnormal returns are significantly positive across the four strategic motives of domestic, international, horizontal, and diversifying cooperative activities. Using a matched sample, we also show that our sample firms enjoy significant, positive, abnormal returns for holding periods of six, 12, and 18 months after the announcement of the cooperative activity.

Keywords: joint ventures; strategic alliances; long-horizon performance; G21/G29/G14

Document Type: Research article

DOI: http://dx.doi.org/10.1111/1540-6288.00043

Affiliations: 1: Bentley College 2: Southern Illinois University

Publication date: 2003-05-01