Revisiting the Monitoring Role of Sovereign Wealth Funds

76 Pages Posted: 12 Apr 2017 Last revised: 25 Aug 2019

See all articles by Nico Lehmann

Nico Lehmann

Humboldt University of Berlin - School of Business and Economics

Almasa Sarabi

Friedrich-Alexander-Universität Erlangen-Nuremberg (FAU)

Date Written: May 22, 2018

Abstract

Using a shock in the expansion of the Norwegian Government Pension Fund Global (GPFG), we examine the long-term organizational consequences of sovereign wealth fund (SWF) investments. Findings from a difference-in-differences test show that firms improve in firm value following the inclusion to GPFG’s U.S. equity portfolio. Cross-sectional tests document that this effect is stronger for firms with higher monitoring demand and higher likelihood to face passive monitoring pressure. Additional analyses indicate that GPFG engagement improves firms’ governance quality, litigation risk, and myopic investment behavior. Our findings are generalizable to monitoring-sensitive SWFs and suggest that these investors create value for firms.

Keywords: Sovereign Wealth Funds, Norwegian Government Pension Fund Global, Institutional Ownership, Monitoring, Tobin's q, Exogenous Shock

JEL Classification: G23, G30, G34

Suggested Citation

Lehmann, Nico and Sarabi, Almasa, Revisiting the Monitoring Role of Sovereign Wealth Funds (May 22, 2018). Available at SSRN: https://ssrn.com/abstract=2950010 or http://dx.doi.org/10.2139/ssrn.2950010

Nico Lehmann (Contact Author)

Humboldt University of Berlin - School of Business and Economics ( email )

Unter den Linden 6, 10099 Berlin
Berlin, 10099
Germany
+49 (0) 302093 99444 (Phone)

Almasa Sarabi

Friedrich-Alexander-Universität Erlangen-Nuremberg (FAU) ( email )

Lange Gasse 20
Lange Gasse 20,
Nürnberg, 90403
Germany

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
170
Abstract Views
1,051
rank
188,259
PlumX Metrics