International joint ventures and firm value: an empirical study of South African partner firms
- Mangwengwende, Tadiwanashe Mukudzeyi
- Authors: Mangwengwende, Tadiwanashe Mukudzeyi
- Date: 2013
- Subjects: Joint ventures Joint ventures -- South Africa Business enterprises -- Valuation International business enterprises
- Language: English
- Type: Thesis , Doctoral , PhD
- Identifier: vital:1033 , http://hdl.handle.net/10962/d1004174
- Description: This study investigates international equity joint ventures (IJVs) and South African partner firm value creation at formation. In addition, it tests whether four contentious formation characteristics, namely, the geographical location of the IJV partner, the level of economic development in the IJV partner’s home country, the level of equity held by the South African firm and the industry of the South African firm, can explain when South African IJVs are value enhancing and when they are value diminishing. IJVs are a popular business mode and an important channel for infrastructure and skills investment in developing countries. However, despite their popularity and potential social benefits, these IJVs are predominantly created by the decisions of private firms to collaborate with foreign firms and governments. Consequently the preservation and development of the IJV investment channel is dependent on the encouragement of private firm IJV participation. It is at uncovering potential tools to encourage IJV participation by South African firms that IJV firm value creation becomes important because it stands as a motivator for South African firms’ involvement in IJVs. Existing literature on IJVs and partner firm value has presented conflicting evidence with support for the views that they are value enhancing, value diminishing or of no immediate consequence to their partners’ firm value. Consequently, previous research offers limited firm value support for IJVs. For South African firms considering joint ventures and national policy makers determined to promote IJVs there is a need for an investigation of South African partner IJV firm value effects. Moreover, it is also necessary to test potential explanatory variables that may help to explain when the IJVs are value enhancing and when they are not as this will inform IJV contract negotiations and how limited national government resources are used to promote IJVs. In order to assess firm value creation for South African firms this study performed event studies on IJV formation announcements from 1998 to 2011 using daily share returns from the Johannesburg Securities Exchange taking care to incorporate recent developments in the event study methodology. The study found that while the market responds to IJV announcements, its responses do not, on average, reflect that IJVs are firm value enhancing for their South African partners at formation. This stands in contrast to considerable empirical literature and IJV firm value creation theory. In addition, factoring in formation characteristics, argued to potentially help explain cases of value creation and destruction from IJVs, provided limited explanation for positive and negative wealth effectsfor South African firms entering IJVs. This result has important value for IJV participants, national economic policy makers and IJV researchers. For IJV participants and national policy makers, the results caution unfettered entry/support for IJVs and challenge the role of equity distribution in determining the value of the IJV to its partner firms. For IJV researchers, the results present new evidence questioning IJV firm value creation at formation and provide a potential explanation for the conflict in previous IJV research. The study makes four key contributions to the existing knowledge of IJV firm value creation. Firstly, it assesses IJV wealth effects for the hitherto untested South African IJVs. Secondly, in doing so it adds a new data set (South African IJVs) to the current IJV literature. Thirdly, in reviewing the literature on IJV firm value creation the study presents a disaggregated model of IJV firm value creation from which to develop IJV research and potentially solve the persistent conflict in empirical results on IJV partner wealth effects. Finally, it informs future South African IJV agreements by uncovering factors that influence and do not influence partner wealth effects for South African firms.
- Full Text:
- Date Issued: 2013
- Authors: Mangwengwende, Tadiwanashe Mukudzeyi
- Date: 2013
- Subjects: Joint ventures Joint ventures -- South Africa Business enterprises -- Valuation International business enterprises
- Language: English
- Type: Thesis , Doctoral , PhD
- Identifier: vital:1033 , http://hdl.handle.net/10962/d1004174
- Description: This study investigates international equity joint ventures (IJVs) and South African partner firm value creation at formation. In addition, it tests whether four contentious formation characteristics, namely, the geographical location of the IJV partner, the level of economic development in the IJV partner’s home country, the level of equity held by the South African firm and the industry of the South African firm, can explain when South African IJVs are value enhancing and when they are value diminishing. IJVs are a popular business mode and an important channel for infrastructure and skills investment in developing countries. However, despite their popularity and potential social benefits, these IJVs are predominantly created by the decisions of private firms to collaborate with foreign firms and governments. Consequently the preservation and development of the IJV investment channel is dependent on the encouragement of private firm IJV participation. It is at uncovering potential tools to encourage IJV participation by South African firms that IJV firm value creation becomes important because it stands as a motivator for South African firms’ involvement in IJVs. Existing literature on IJVs and partner firm value has presented conflicting evidence with support for the views that they are value enhancing, value diminishing or of no immediate consequence to their partners’ firm value. Consequently, previous research offers limited firm value support for IJVs. For South African firms considering joint ventures and national policy makers determined to promote IJVs there is a need for an investigation of South African partner IJV firm value effects. Moreover, it is also necessary to test potential explanatory variables that may help to explain when the IJVs are value enhancing and when they are not as this will inform IJV contract negotiations and how limited national government resources are used to promote IJVs. In order to assess firm value creation for South African firms this study performed event studies on IJV formation announcements from 1998 to 2011 using daily share returns from the Johannesburg Securities Exchange taking care to incorporate recent developments in the event study methodology. The study found that while the market responds to IJV announcements, its responses do not, on average, reflect that IJVs are firm value enhancing for their South African partners at formation. This stands in contrast to considerable empirical literature and IJV firm value creation theory. In addition, factoring in formation characteristics, argued to potentially help explain cases of value creation and destruction from IJVs, provided limited explanation for positive and negative wealth effectsfor South African firms entering IJVs. This result has important value for IJV participants, national economic policy makers and IJV researchers. For IJV participants and national policy makers, the results caution unfettered entry/support for IJVs and challenge the role of equity distribution in determining the value of the IJV to its partner firms. For IJV researchers, the results present new evidence questioning IJV firm value creation at formation and provide a potential explanation for the conflict in previous IJV research. The study makes four key contributions to the existing knowledge of IJV firm value creation. Firstly, it assesses IJV wealth effects for the hitherto untested South African IJVs. Secondly, in doing so it adds a new data set (South African IJVs) to the current IJV literature. Thirdly, in reviewing the literature on IJV firm value creation the study presents a disaggregated model of IJV firm value creation from which to develop IJV research and potentially solve the persistent conflict in empirical results on IJV partner wealth effects. Finally, it informs future South African IJV agreements by uncovering factors that influence and do not influence partner wealth effects for South African firms.
- Full Text:
- Date Issued: 2013
The relationship between bank concentration and the interest rate pass through in selected African countries
- Mangwengwende, Tadiwanashe Mukudzeyi
- Authors: Mangwengwende, Tadiwanashe Mukudzeyi
- Date: 2010
- Subjects: Interest rates -- Effect of inflation on -- Africa , Monetary policy -- Africa , Prime rate , Prime rate -- Africa
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:942 , http://hdl.handle.net/10962/d1002675
- Description: Given the importance of monetary policy in the operation of a successful modern economy and the use of official interest rates as tools in its implementation, this study investigates the implications of changing bank concentration on the operation of the Interest Rate Pass Through (IRPT) of official rates to bank lending and deposit rates. This is an issue made more poignant by growing mergers, acquisitions and bank consolidation exercises around the world that have brought interest to their implications for economic performance. However, with contention high in the industrial organisation theory on the likely relationship between bank concentration and the IRPT, and the outcomes of empirical investigations producing conflicting evidence, the desire to investigate the issue in the African context necessitated a thorough empirical investigation of four African countries (South Africa, Botswana, Nigeria and Zambia). This study not only extended the investigation of the issue to the African context, but it merged different IRPT measurement techniques that had not been jointly applied to this particular issue, namely; Symmetric and Asymmetric Error Correction Models, Mean Adjustment Lags, Ordinary Least Squares estimations and Autoregressive Distributed Lag models. These measures of the IRPT were compared with three firm concentration ratios on two different levels of analysis, one, over the entire period and, another, through eight year rolling windows. The results reveal that bank concentration can sometimes be related to the speed and magnitude of the IRPT but that these relationships are not consistent amongst the countries, over the entire sample period or across the two levels of analysis, suggesting reasons why empirical results have arrived at contrasting conclusions. The results revealed more evidence of a relationship between bank concentration and the magnitude of the IRPT than between bank concentration and the speed of the IRPT. Furthermore, where relationships were identified there was evidence supporting both the structure conduct performance hypothesis and the competing efficient market hypothesis as the true representation of the relationship between bank concentration and the IRPT. The key implication of the result for African countries is that increased bank concentration through bank consolidation programmes should not be automatically regarded as detrimental to the effective implementation of monetary policy through the IRPT. Consequently,banking sector regulation need not stifle bank consolidation and growth to preserve monetary policy effectiveness. Rather, since the relationship cannot be neatly represented by a single theory or hypothesis each country must determine its own interaction between bank concentration and its IRPT before policies regarding the banking sector concentration and effective monetary policy, through the use of official interest rates, are determined.
- Full Text:
- Date Issued: 2010
- Authors: Mangwengwende, Tadiwanashe Mukudzeyi
- Date: 2010
- Subjects: Interest rates -- Effect of inflation on -- Africa , Monetary policy -- Africa , Prime rate , Prime rate -- Africa
- Language: English
- Type: Thesis , Masters , MCom
- Identifier: vital:942 , http://hdl.handle.net/10962/d1002675
- Description: Given the importance of monetary policy in the operation of a successful modern economy and the use of official interest rates as tools in its implementation, this study investigates the implications of changing bank concentration on the operation of the Interest Rate Pass Through (IRPT) of official rates to bank lending and deposit rates. This is an issue made more poignant by growing mergers, acquisitions and bank consolidation exercises around the world that have brought interest to their implications for economic performance. However, with contention high in the industrial organisation theory on the likely relationship between bank concentration and the IRPT, and the outcomes of empirical investigations producing conflicting evidence, the desire to investigate the issue in the African context necessitated a thorough empirical investigation of four African countries (South Africa, Botswana, Nigeria and Zambia). This study not only extended the investigation of the issue to the African context, but it merged different IRPT measurement techniques that had not been jointly applied to this particular issue, namely; Symmetric and Asymmetric Error Correction Models, Mean Adjustment Lags, Ordinary Least Squares estimations and Autoregressive Distributed Lag models. These measures of the IRPT were compared with three firm concentration ratios on two different levels of analysis, one, over the entire period and, another, through eight year rolling windows. The results reveal that bank concentration can sometimes be related to the speed and magnitude of the IRPT but that these relationships are not consistent amongst the countries, over the entire sample period or across the two levels of analysis, suggesting reasons why empirical results have arrived at contrasting conclusions. The results revealed more evidence of a relationship between bank concentration and the magnitude of the IRPT than between bank concentration and the speed of the IRPT. Furthermore, where relationships were identified there was evidence supporting both the structure conduct performance hypothesis and the competing efficient market hypothesis as the true representation of the relationship between bank concentration and the IRPT. The key implication of the result for African countries is that increased bank concentration through bank consolidation programmes should not be automatically regarded as detrimental to the effective implementation of monetary policy through the IRPT. Consequently,banking sector regulation need not stifle bank consolidation and growth to preserve monetary policy effectiveness. Rather, since the relationship cannot be neatly represented by a single theory or hypothesis each country must determine its own interaction between bank concentration and its IRPT before policies regarding the banking sector concentration and effective monetary policy, through the use of official interest rates, are determined.
- Full Text:
- Date Issued: 2010
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