The Influence of U.s. Joint Ventures in Asia on Shareholder Wealth

U.S. direct investment in Asia has almost doubled from 1990 to 1995. U.S. investment in China alone has increased sixfold during this period. Further, today about $1 in every $5 invested abroad by U.S. investors is invested in Asia (Department of Commerce, 1996). Obviously, Asia is more and more becoming an attractive target for U.S. investors. The predominant method for U.S. business to enter Asia is through the joint venture. Motives for joint ventures are presented by Harrigan (1985), Hennert (1988) and Taggert and McDermott (1993). A few studies have examined the wealth effects of U.S. joint ventures in specific countries of Asia (Lee and Wyatt (1990), Hu, Chan and Shieh (1992), and Chung, Koford and Lee (1993)). Nevertheless, there is still some uncertainty about the overall effect of U.S. joint ventures in Asia on U.S. shareholders. Given the significant growth of U.S. direct investment in Asia, the purpose of this paper is to reexamine the issue of U.S. joint ventures in Asia and measure their overall impact on shareholder wealth. This study extends earlier research by examining a considerable sample of joint ventures over a long time period.