State-Owned Enterprises and Cross-Border Alliances

Abstract

This study examines the international alliance activities of state-owned enterprises (SOEs). We find that country-level political and economic factors, such as autocracy, foreign ownership restrictions, foreign currency reserve, and industry dissimilarity, increase the likelihood of SOEs’ participation in cross-border alliances. Our analyses further reveal that foreign firms tend to collaborate with local SOEs when facing high expropriation risks and the presence of a state-dominated banking system in the host country. Further, foreign firms experience higher announcement returns when they ally with local SOEs rather than with non-SOEs. This result suggests that the exclusive benefits from SOEs are value-creating for the international alliance partners. Overall, our findings provide novel insights into the determinants and wealth effect of SOEs’ engagement in international alliance activities.