The Impact of Foreign Government Investments on Corporate Performance: Evidence from the U.S.

53 Pages Posted: 26 Jan 2010 Last revised: 1 Aug 2011

See all articles by Elvira Sojli

Elvira Sojli

UNSW Australia Business School, School of Banking and Finance

Wing Wah Tham

University of New South Wales (UNSW)

Date Written: June 2, 2010

Abstract

Foreign and politically connected large investors, like foreign government investors, improve firm value through the provision of foreign market access and government-related contracts. In the short run, the market welcomes foreign government investments in expectation of potential monitoring and internationalization benefits. In the long run, the target firms' degree of internationalization and Tobin's q increase substantially after foreign government investments. The increase in q is directly related to the number of government-related contracts granted by the investing countries. The target companies contribute to the investors' markets by transferring technological know-how, increasing their competitiveness, and providing certification for their markets.

Keywords: Foreign Government Investments; Foreign Political Connections; Government-related Contracts; Internationalization; Large Shareholders

JEL Classification: F23, G15, G23, G32, G34

Suggested Citation

Sojli, Elvira and Tham, Wing Wah, The Impact of Foreign Government Investments on Corporate Performance: Evidence from the U.S. (June 2, 2010). Paris December 2010 Finance Meeting EUROFIDAI - AFFI. Available at SSRN: https://ssrn.com/abstract=1540555 or http://dx.doi.org/10.2139/ssrn.1540555

Elvira Sojli (Contact Author)

UNSW Australia Business School, School of Banking and Finance ( email )

Sydney, NSW 2052
Australia

Wing Wah Tham

University of New South Wales (UNSW)

Kensington
High St
Sydney, NSW 2052
Australia

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