The Effect of Sovereign Wealth Funds on Corporations: Evidence of Cash Policies in Singapore

21 Pages Posted: 20 Aug 2015 Last revised: 3 Jun 2020

See all articles by Chenxi Liu

Chenxi Liu

Singapore Management University - Lee Kong Chian School of Business

Nelson Yap

Independent

Chen Yin

Fudan University - School of Economics

Sili Zhou

Fanhai International School of Finance and School of Economics, Fudan University

Date Written: June 1, 2020

Abstract

This paper studies the monitoring role of sovereign wealth funds (SWFs). By using unique dataset from one of the largest SWF Temasek holdings, we find that SWF’s presence has a positive effect on cash holdings of portfolio companies. The effect is more pronounced for well-governed firms, indicating that Temasek increases corporate cash holdings through its active role in corporate governance. We further find supportive evidence that Temasek ownership affects cash holdings by hoarding excess cash and reducing capital expenditure, especially within firms with good governance. Temasek’s discerning effect on cash policies highlights the effective monitoring role of sovereign wealth funds.

Keywords: Cash Holdings, Sovereign Wealth Fund, Corporate Governance, Temasek Ownership, Corporate Policy

JEL Classification: G32, G34, G35

Suggested Citation

Liu, Chenxi and Yap, Nelson and Yin, Chen and Zhou, Sili, The Effect of Sovereign Wealth Funds on Corporations: Evidence of Cash Policies in Singapore (June 1, 2020). Asian Finance Association (AsianFA) 2016 Conference, Available at SSRN: https://ssrn.com/abstract=2648068 or http://dx.doi.org/10.2139/ssrn.2648068

Chenxi Liu

Singapore Management University - Lee Kong Chian School of Business ( email )

469 Bukit Timah Road
Singapore 912409
Singapore

Nelson Yap

Independent

Chen Yin

Fudan University - School of Economics ( email )

600 GuoQuan Road
Shanghai, 200433
China

Sili Zhou (Contact Author)

Fanhai International School of Finance and School of Economics, Fudan University ( email )

Room 520, Building 5, 220 Handan Road
Shanghai
China

HOME PAGE: http://siliz.weebly.com/

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
102
Abstract Views
809
rank
284,696
PlumX Metrics