Firm Values and Sovereign Wealth Fund Investments
59 Pages Posted: 6 Mar 2009 Last revised: 28 Aug 2009
Date Written: August 25, 2009
Abstract
Sovereign Wealth Funds (SWFs) manage investment portfolios on behalf of governments that own the portfolios. We analyze the impact of SWF investments on the values of the companies in which they invest and provide evidence consistent with the tradeoff between the monitoring and lobbying benefits versus tunneling and expropriation costs of SWFs as block holders. The data show significant positive (negative) returns to announcements of SWF investments (divestments). The returns are non-monotonic, first rising (falling) and then falling (rising) with the share sought (sold) for investments (divestments). Moreover, we find that SWFs are often active investors. Slightly more than half of the target firms experience one or more events indicative of SWF monitoring activity or influence.
Keywords: Sovereign wealth funds, Blockholders
JEL Classification: G38, G32, G15
Suggested Citation: Suggested Citation
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