The Sovereign Wealth Fund Discount: Evidence from Public Equity Investments

Bernardo Bortolotti; Veljko Fotak; William L. Megginson

doi:10.1093/rfs/hhv036

The Sovereign Wealth Fund Discount: Evidence from Public Equity Investments

Bernardo Bortolotti
, Veljko Fotak
, William L. Megginson

Finance

University of Turin
University of Oklahoma

Research output: Contribution to journal › Article › peer-review

106 Scopus citations

Abstract

We document that announcement-period abnormal returns of sovereign wealth fund (SWF) equity investments in publicly traded firms are positive but lower than those of comparable private investments. Further, SWF investment targets suffer from declining return on assets and sales growth over the following three years. Our results are robust to controls for target and deal characteristics and are not driven by SWF target selection criteria. Larger discounts are associated with SWFs taking seats on boards of directors and with SWFs under strict government control acquiring greater stakes, supporting the hypothesis that political influence negatively affects firm value and performance.

Original language	English
Pages (from-to)	2993-3035
Number of pages	43
Journal	Review of Financial Studies
Volume	28
Issue number	11
DOIs	https://doi.org/10.1093/rfs/hhv036
State	Published - Nov 2015

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10.1093/rfs/hhv036

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title = "The Sovereign Wealth Fund Discount: Evidence from Public Equity Investments",

abstract = "We document that announcement-period abnormal returns of sovereign wealth fund (SWF) equity investments in publicly traded firms are positive but lower than those of comparable private investments. Further, SWF investment targets suffer from declining return on assets and sales growth over the following three years. Our results are robust to controls for target and deal characteristics and are not driven by SWF target selection criteria. Larger discounts are associated with SWFs taking seats on boards of directors and with SWFs under strict government control acquiring greater stakes, supporting the hypothesis that political influence negatively affects firm value and performance.",

author = "Bernardo Bortolotti and Veljko Fotak and Megginson, \{William L.\}",

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AU - Bortolotti, Bernardo

AU - Fotak, Veljko

AU - Megginson, William L.

N1 - Publisher Copyright: © 2015 The Author 2015. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please e-mail: [email protected].

PY - 2015/11

Y1 - 2015/11

N2 - We document that announcement-period abnormal returns of sovereign wealth fund (SWF) equity investments in publicly traded firms are positive but lower than those of comparable private investments. Further, SWF investment targets suffer from declining return on assets and sales growth over the following three years. Our results are robust to controls for target and deal characteristics and are not driven by SWF target selection criteria. Larger discounts are associated with SWFs taking seats on boards of directors and with SWFs under strict government control acquiring greater stakes, supporting the hypothesis that political influence negatively affects firm value and performance.

AB - We document that announcement-period abnormal returns of sovereign wealth fund (SWF) equity investments in publicly traded firms are positive but lower than those of comparable private investments. Further, SWF investment targets suffer from declining return on assets and sales growth over the following three years. Our results are robust to controls for target and deal characteristics and are not driven by SWF target selection criteria. Larger discounts are associated with SWFs taking seats on boards of directors and with SWFs under strict government control acquiring greater stakes, supporting the hypothesis that political influence negatively affects firm value and performance.

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DO - 10.1093/rfs/hhv036

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JO - Review of Financial Studies

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IS - 11

ER -

The Sovereign Wealth Fund Discount: Evidence from Public Equity Investments

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