Market reaction to business cooperation announcements - evidence from Germany

Wöhrmann A., Schlaefke, M.

Abstract

Joint ventures and other cooperative activities have increased considerably over the last two decades. Yet, there is only limited evidence how investors react when such a business cooperation is announced, whereas there is ample evidence for merger and acquisition announcements. Hence, this paper examines share price response to public announcements of business cooperation in Germany. Unlike previous studies, the present work uses a comprehensive approach and includes a wide variety of business cooperation: strategic alliances, formation of joint ventures, project cooperation, public-private partnerships and value chain cooperation. Using an event study research design, we investigate a sample of 193 announcements of business cooperation issued in the period of 2008-2012 across all industries. We generate evidence that German companies experience significant abnormal returns of 0.61% on the day of announcement. Our results further indicate that stock market reactions are associated with managers providing information about the reasons for the business cooperation. We find that stock market reaction is more positive when a short-term motive for the cooperation is provided.