Implications of strategic alliances for earnings quality and capital market investors
Date
Authors
Editor(s)
Advisor
Supervisor
Co-Advisor
Co-Supervisor
Instructor
Source Title
Print ISSN
Electronic ISSN
Publisher
Volume
Issue
Pages
Language
Type
Journal Title
Journal ISSN
Volume Title
Series
Abstract
Strategic alliances are well-established organizational forms and a means of strategy implementation. Despite their growing pervasiveness in the economy, existent literature provides few insights about earnings quality of strategic alliances. This challenge is especially severe in contractual alliances (CAs), where firms do not form a new corporate entity that is separate from the parent organization in comparison to joint ventures (JVs). We investigate how earnings attributes differ depending on involvement in strategic alliances of 8137 CAs and 3026 JVs spanning 1997-2007. We find, in particular, that earnings attributes of firms involved in contractual alliances are broadly reflective of low underlying accounting quality. Relative to JV firms and non-alliance (NA) firms, they have higher levels of discretionary accruals, lower accrual quality, and earnings that are less persistent, less smooth, less relevant, less timely, and less conservative. They also have lower earnings response coefficients. © 2013 Elsevier Inc.