Sudip Datta and Anand Jha accepted for publication in Financial Management
Mike Ilitch School of Business T. Norris Hitchman Endowed Chair and Professor of Finance Sudip Datta and Associate Professor of Finance Anand Jha co-authored a paper accepted for publication in Financial Management.
The flagship quarterly journal for the Financial Management Association, Financial Management “significantly impacts financial research and business practice by publishing research of high quality.”
The paper, “Does policy uncertainty increase relational risks? Evidence from strategic alliances,” discusses how increased relational risk is a primary driver behind the diminished propensity to undertake strategic alliances during enhanced policy uncertainty regimes.
Prior studies on capital investments, including mergers and acquisitions, point to investment irreversibility as the primary factor behind diminished investments during periods of increased policy uncertainty. We show that increased relational risk, due to the potential for counterparty misbehavior or shirking and higher contracting costs, appears to be the primary driver behind the diminished propensity to undertake strategic alliances during enhanced policy uncertainty regimes. Alliances are even less likely during such times when they (a) involve more than two firms, (b) are in industries with greater counterparty risk, and (c) involve partners that require intense contracts.