Compared to domestic acquisitions, cross-border acquisitions present greater challenges for buyers. This article analyzes the use of contingent payments, joint ventures, and toehold investments as potential mechanisms for reducing uncertainty in cross-border acquisitions. Toehold investments and earnout payments are associated with larger gains to buyers in domestic acquisitions, but not in cross-border acquisitions. The results indicate that joint ventures can be an effective mechanism to ameliorate the uncertainty associated with cross-border acquisitions in the presence of severe valuation uncertainties and country investment risks.

Extensive empirical work shows that bidders do not gain from the acquisition of publicly traded targets but experience positive excess returns in the acquisition of privately held firms. This study investigates how two important differences between private and public firms, namely, informational uncertainty and ownership characteristics, impact the returns to acquirers. A sample of targets that were acquired shortly after filing for an IPO was collected to circumvent the lack of information on private firms. In spite of the special characteristics of these targets, the listing effect is still prevalent in this sample. The results of the analysis are consistent with the hypothesis that acquirers gain in the acquisition of private firms because these targets have a relatively weaker bargaining position due to informational and agency problems and costly access to external capital markets to finance growth opportunities.

Listing shares in liquid secondary markets either to facilitate acquisitions or to diversify owner’s personal wealth are among the most important reasons for firms to go public [Brau, J.C., Fawcett, S.E., 2006. Initial public offerings: An analysis of theory and practice. Journal of Finance 61, 399–436]. We contend that the expected benefits derived from the liquidity provided by secondary markets are relevant for understanding important decisions made in preparation for an IPO. We hypothesize that the potential losses caused by an IPO failure induce firms that benefit more from going public to hire more reputable underwriters and to adopt more conservative pricing policies. We use several proxies for the benefits firms derive from post-IPO liquidity. The results indicate that firms that benefited more from liquidity were taken public by more prestigious underwriters and exhibited substantially larger levels of price revisions and underpricing. Post-IPO liquidity is also important for understanding the decision to retain the lead underwriter in subsequent SEOs.

The final disposition of assets at the conclusion of joint venture arrangements is important to an understanding of the motivation to pursue a joint venture and the wealth created by these collaborations. A comparison between conventional asset sales and asset sales occurring within a joint venture structure shows that the total wealth created is larger if the assets have been under shared control in a joint venture. Our results support the contention that the establishment of a joint venture creates an opportunity for a relationship-based exchange of information that can serve as a mechanism to transfer assets in the presence of a high degree of asymmetric information.

We analyze joint ventures initiated by two publicly traded firms, and compare the results to asset sales and mergers. Combined returns are significantly greater for joint ventures than asset sales, and smaller than mergers. Gains are shared between joint venture parties, unlike asset sales and mergers where all gains accrue to sellers/targets. Ownership structure has no effect on joint venture returns. Combined gains from quasi-asset-sale joint ventures are significantly greater than for asset sales, and similar to mergers. Horizontal joint ventures generate greater gains than vertical or cross-industry ventures, and there is evidence that horizontal ventures capitalize expected monopoly rents.

Joint ownership of assets by two partners can have an adverse effect on the incentives to invest and can result in unstable and inefficient organizational structures. Control sharing, however, plays an important role in economic, political, and social institutions. There is scarce empirical evidence on the benefits of joint ownership in corporate finance. We analyze acquisitions of corporate assets by joint ventures to empirically ascertain the value of joint ownership in economic activities. The results indicate that firms experience significantly larger returns in joint acquisitions than in full-control acquisitions and that this difference is restricted to the sample of firms in which both partners share equal ownership in the target. These findings suggest that monitoring in joint ownership structures ameliorates the possibility of value-destroying corporate decisions.

Some Korean business groups, or chaebols, have a large stake in securities firms that issue analysts’ reports on their member companies. This structure is unique in that industrial companies and securities firms are affiliated and operate within the same group. We investigate the informational content of earnings forecasts, stock recommendations and target prices made by the chaebol-affiliated analysts, using data collected between 2000 and 2008. The chaebol analysts tend to make more optimistic earnings forecasts for the member companies. The mean EPS forecast error (5.36%) of the affiliated analysts for the same chaebol company are significantly larger than that (3.23%) of other chaebol and independent analysts. The chaebol analysts also assign better recommendations by almost one level and set target prices 2.5% higher to the member companies after controlling for company and analyst characteristics. These results are consistent with the hypothesis that chaebol analysts’ reports are biased by conflicts of interest. Stock market reactions do not differ in response to announcements of stock recommendations issued by affiliated vs. non-affiliated analysts. This suggests that capital markets do not recognize the conflicts of interest inherent in chaebol analysts’ reports.