Firm Values and Sovereign Wealth Fund Investments

60 Pages Posted: 26 Dec 2009 Last revised: 28 Dec 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: December 22, 2009

Abstract

We analyze the impact of Sovereign Wealth Fund (SWF) investments on firm values 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, block holders, firm value

JEL Classification: G28, G34, G38

Suggested Citation

Dewenter, Kathryn L. and Han, Xi and Malatesta, Paul H., Firm Values and Sovereign Wealth Fund Investments (December 22, 2009). Journal of Financial Economics, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1527863

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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