Determinants of Sovereign Wealth Fund Investment in Private Equity

42 Pages Posted: 18 Dec 2010 Last revised: 27 Sep 2011

See all articles by Sofia Johan

Sofia Johan

Florida Atlantic University - Finance; Tilburg Law and Economics Center (TILEC)

April M. Knill

Florida State University College of Business; Florida State University - College of Law

Nathan Mauck

University of Missouri - Kansas City

Date Written: December 8, 2010

Abstract

This paper examines investment patterns of 50 sovereign wealth funds (SWFs) in nations around the world. We study investment by SWFs in 903 public and private firms over the period 1984-2009. As expected, we observe SWFs investments are more often in private firms when the market returns of target nations are negatively correlated to the market returns of the SWF nations. But counter to expectations, the data indicate that SWFs are more likely to invest in private firms of target nations with weaker legal conditions, and when the legal differences between the SWF country and the target country are more pronounced. This evidence is consistent with strategic rationales for investment and potential corporate governance conflicts.

Keywords: Sovereign wealth fund, private equity, international financial markets, legality, government policy, regulation

JEL Classification: G11, G29

Suggested Citation

Johan, Sofia A. and Knill, April M. and Mauck, Nathan, Determinants of Sovereign Wealth Fund Investment in Private Equity (December 8, 2010). TILEC Discussion Paper No. 2010-044. Available at SSRN: https://ssrn.com/abstract=1722206 or http://dx.doi.org/10.2139/ssrn.1722206

Sofia A. Johan (Contact Author)

Florida Atlantic University - Finance ( email )

777 Glades Rd
Boca Raton, FL 33431
United States

Tilburg Law and Economics Center (TILEC) ( email )

Warandelaan 2
Tilburg, 5000 LE
Netherlands

April M. Knill

Florida State University College of Business ( email )

Tallahassee, FL 32306-1042
United States
(850) 644-2047 (Phone)

Florida State University - College of Law ( email )

425 W. Jefferson Street
Tallahassee, FL 32306
United States

Nathan Mauck

University of Missouri - Kansas City ( email )

5100 Rockhill Road
Kansas City, MO 64110-2499
United States

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