Structuring international joint ventures: bargaining, equity participation, and private information

Noe, Thomas, Rebello, Michael and Shrikhande, Milind (2002) Structuring international joint ventures: bargaining, equity participation, and private information. The Review of Financial Studies, 15 (4). pp. 1251-1282.

Abstract

We examine the effect of bargaining power and informational asymmetry on the design of international cooperative ventures in the presence of restrictions on equity participation and investment. When the bargaining advantage rests with the multinational, equity participation restrictions can increase the profits to domestic firms and encourage sub-optimal investment policies. Overinvestment occurs when the multinational's bargaining advantage is reinforced by an informational advantage, while underinvestment occurs when the domestic firm possesses the informational advantage. In contrast, when the bargaining advantage rests with the domestic firm, equity participation restrictions do not affect investment levels.

Item Type: Article
Keywords: collective bargaining; investment policy; finance
Subject(s): Finance
Date Deposited: 09 Nov 2011 16:08
Last Modified: 02 Mar 2017 11:05
Funders: N/A
URI: http://eureka.sbs.ox.ac.uk/id/eprint/1118

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