Agathokakological investors? Sovereign wealth fund ownership and firm ESG reputation risk

Consistent with the predatory view of sovereign wealth fund (SWF) ownership, we find SWF ownership is associated with an increase in the environmental, social, and governance (ESG) reputation risk of the SWFs' portfolio firms. We provide direct evidence that SWF ownership is associated with negative firm outcomes, including a reduction in monitoring institutions' ownership, support for environmental and social proposals, firm value, and investment efficiency. However, ESG reputational damage is mitigated when the SWF-investee firm pair shares political affinity, proximal national governance, dominant religion, and social ties; and SWFs are transparent, PRI signatories, and domiciled in a democracy.

Keywords: institutional ownership, reputation risk, environmental, social, and governance, sovereign wealth funds

JEL Classification: F64, G11, G15, G32, G38, Q01

Suggested Citation: Suggested Citation

Farag, Hisham and Neupane, Biwesh and Marshall, Andrew P. and Koirala, Santosh, Agathokakological investors? Sovereign wealth fund ownership and firm ESG reputation risk (June 20, 2022). Available at SSRN: https://ssrn.com/abstract=4141487 or http://dx.doi.org/10.2139/ssrn.4141487