We provide novel evidence showing that shareholder litigation risk influences firms’ choices of external growth strategies. Using staggered adoption of universal demand (UD) laws, we find that firms under the threat of litigation tend to choose corporate alliances over mergers and acquisitions (M&As). This finding supports the view that alliances offer a low-risk and low-cost alternative to M&As for firms facing litigation risk. Moreover, alliance performance improves after the passage of UD laws, suggesting that firms can make better deal selections under reduced litigation threats. Overall, we establish an unexplored link between litigation risk and firms’ choices of boundary-expanding transactions.

Target acquisitiveness stands out as one of the primary drivers of all the key aspects of the market for corporate takeovers: acquisition announcement returns, probability of deal success, propensity to acquire and be acquired. Acquisitive targets, though a small proportion of the sample, are responsible for half of the overall negative acquisition announcement returns. Our large body of empirical evidence consistently supports the view that the motivation behind acquisitions of acquisitive targets is defensive: acquirers “eat in order not to be eaten”.

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.