MAR Seminar by Mariia Koval

Alliance termination and firm idiosyncratic risk: the role of governance misfit

2017.12.20 | Merete Elmann

Date Mon 08 Jan
Time 10:00 11:30
Location Room 2628-M303, Department of Management, Aarhus BSS, Aarhus University


Monday, 8 January at 10:00 in room 2628-M303, Mariia Koval, PhD candidate from  BI Norwegian Business School, will give a seminar entitled

Alliance termination and firm idiosyncratic risk: the role of governance misfit

 

Everyone is welcome!

 

Abstract
Prior research has shown that strategic alliance announcements can serve to reduce firm idiosyncratic risk. Still, more than 50 percent of alliances terminate shorty after they have been announced. A small but growing body of literature has examined antecedents of such unplanned alliance terminations, documenting that a major hazard facing firms engaging in alliances is partner opportunism. In this paper, we study the consequences of the announcement of an unplanned alliance termination. Specifically, we examine how the alliances are organized or governed, and how this influences the stock market’s reaction to an unplanned alliance termination. Drawing on transaction cost economics, we find that termination of a misgoverned alliance, or an alliance which is not organized according to the transactional hazards facing the alliance partners, serves to decrease firm idiosyncratic risk. Moreover, we find that this effect is contingent on how long the alliance has lasted. Specifically, for alliances with excess governance, the longer the alliance has lasted, the weaker the effect of an unplanned alliance termination on firm idiosyncratic risk. Conversely, for alliances with a lack of governance, the more pronounced the effect of an unplanned alliance termination on firm idiosyncratic, the longer the alliance has lasted. We discuss the implications of our findings for alliance theory and management.

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