1. ¹The University of Texas at San Antonio, San Antonio, TX, USA
2. ²Indiana University, Bloomington, IN, USA
3. ³Texas A & M University, College Station, TX, USA

Correspondence: SR Miller, The University of Texas at San Antonio, One UTSA Circle, San Antonio, TX 78249, USA. Tel: +1 210 458 6868; Fax: +1 210 458 5783; E-mail: stewart.miller@utsa.edu

Received 3 August 2005; Revised 2 April 2007; Accepted 20 April 2007; Published online 11 October 2007.

Abstract

Because stock markets in emerging economies are relatively new, under-regulated, and often segmented, investors' responses to public announcements by firms in these economies may differ from responses in developed economies' stock markets. We draw on the institutional and corporate governance literatures to explain investor reactions to announcements of international strategic alliances (ISAs) between foreign and emerging-market firms. We argue that emerging economies' stock markets positively value ISAs; however, information leakages due to weak regulatory environments siphon off the "good news" before the ISA announcement date. The level of state ownership of publicly traded firms and the nationality of foreign partners both affect the size and timing of market reactions.