The Sovereign Wealth Fund Discount: Evidence from Public Equity Investments

57 Pages Posted: 9 Sep 2013 Last revised: 11 Apr 2015

See all articles by Bernardo Bortolotti

Bernardo Bortolotti

Bocconi University; University of Turin

Veljko Fotak

State of New York (SUNY) at Buffalo; Bocconi University - BAFFI Center on International Markets, Money, and Regulation

William L. Megginson

University of Oklahoma

Date Written: February 10, 2015

Abstract

Using a sample of 1,018 Sovereign Wealth Fund (SWF) equity investments in publicly traded firms and a control sample of 5,975 transactions by private-sector financial institutions over 1980-2012, we find that announcement-period abnormal returns of SWF investments are positive, but lower than those of comparable private-sector investments by approximately 2.67 percentage points. We do not find evidence of long-term stock price performance of SWF investment targets differing from that of private-sector investment targets. We do find, however, significant differences among SWFs which are only partially captured by the short-term market reaction: firms acquired by passive funds tend to underperform over the following three years, while positive abnormal returns are associated with actively monitoring SWFs. We conclude that SWFs’ corporate governance role tends to affect the value of the firm.

Keywords: Sovereign wealth funds, International financial markets, Government policy and regulation

JEL Classification: G32, G15, G38

Suggested Citation

Bortolotti, Bernardo and Fotak, Veljko and Megginson, William L., The Sovereign Wealth Fund Discount: Evidence from Public Equity Investments (February 10, 2015). Baffi Center Research Paper No. 2013-140; FEEM Working Paper No. 22.2009. Available at SSRN: https://ssrn.com/abstract=2322745 or http://dx.doi.org/10.2139/ssrn.2322745

Bernardo Bortolotti (Contact Author)

Bocconi University ( email )

Via Sarfatti 25
Milan, MI 20136
Italy

University of Turin

Via Po 53
Torino, Turin - Piedmont 10100
Italy

Veljko Fotak

State of New York (SUNY) at Buffalo ( email )

School of Management, University at Buffalo
236 Jacobs Management Center
Buffalo, NY 14260
United States
+1 716-645-1541 (Phone)

Bocconi University - BAFFI Center on International Markets, Money, and Regulation ( email )

Milano, 20136
Italy

William L. Megginson

University of Oklahoma ( email )

307 W Brooks, 205A Adams Hall
Norman, OK 73019
United States
(405) 325-2058 (Phone)
(405) 325-1957 (Fax)

HOME PAGE: http://faculty-staff.ou.edu/M/William.L.Megginson-

Register to save articles to
your library

Register

Paper statistics

Downloads
5,046
Abstract Views
18,009
rank
1,464
PlumX Metrics