Corporate Quasi-Strategic Alliance via Outsourcing Transactions

Abstract

This paper relates outsourcing parties together and tests whether the out sourc ing contracts have any impact on the relationship of the two parties’ perfor mance. Both the ex-anti and the ex-post changes in stock and accounting related performance of the contract signatories are examined. We find that after the con tract effective year, there is statistically significant cross-autocorrelation be tween client and vendor firms’ stock returns. What’s more, on average daily returns of the client stocks lead those of the vendor stocks. We also find that ac counting performance changes between the two parties show significantly higher level of cross-correlation than pre-event. Our finding of an increase in cross-autocorrelation between the ex-post performance of client and vendor firms indicates that corporate outsourcing transactions result in a quasi-strategic alliance.