Firm Values and Sovereign Wealth Fund Investments

59 Pages Posted: 6 Mar 2009 Last revised: 28 Aug 2009

See all articles by Kathryn L. Dewenter

Kathryn L. Dewenter

University of Washington - Michael G. Foster School of Business

Xi Han

San Francisco State University - Department of Finance

Paul H. Malatesta

University of Washington - Michael G. Foster School of Business

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

Dewenter, Kathryn L. and Han, Xi and Malatesta, Paul H., Firm Values and Sovereign Wealth Fund Investments (August 25, 2009). Available at SSRN: https://ssrn.com/abstract=1354252 or http://dx.doi.org/10.2139/ssrn.1354252

Kathryn L. Dewenter (Contact Author)

University of Washington - Michael G. Foster School of Business ( email )

Box 353200
Dept. of Finance & Business Economics
Seattle, WA 98195-3200
United States
206-685-7893 (Phone)
206-685-9392 (Fax)

Xi Han

San Francisco State University - Department of Finance ( email )

1600 Holloway Avenue
San Francisco, CA 94132-1722
United States

Paul H. Malatesta

University of Washington - Michael G. Foster School of Business ( email )

Box 353200
Seattle, WA 98195-3200
United States

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