The Impact of Sovereign Wealth Funds on Corporate Value and Performance

11 Pages Posted: 8 Apr 2014

See all articles by Nuno Fernandes

Nuno Fernandes

University of Navarra, IESE Business School; European Corporate Governance Institute (ECGI)

Date Written: Winter 2014

Abstract

The last few years have seen a remarkable increase in the participation of sovereign wealth funds (SWFs) in global capital markets. In this article, the author draws on a unique dataset of SWF international holdings - one that dates back to the year 2002 and includes individual SWF holdings in more than 8,000 companies in 58 countries - to provide evidence of the impact of SWFs on corporate values and operating performance. Contrary to claims that SWFs expropriate minority investors and pursue political agendas, the main finding of the author's study is that SWF ownership is associated with positive changes in both corporate market values and operating returns. In support of these findings, the author also identifies three important ways that SWFs work to increase the performance and value of the companies they invest in: (1) as long‐term holders that provide a stable source of financing; (2) as representatives of deep pools of international capital in search of global diversification opportunities that are likely to provide companies with a lower‐cost (as well as more “patient”) source of equity capital; and (3) as politically well‐connected strategic investors that enable their companies to leverage important connections when accessing new product markets.

Suggested Citation

Fernandes, Nuno, The Impact of Sovereign Wealth Funds on Corporate Value and Performance (Winter 2014). Journal of Applied Corporate Finance, Vol. 26, Issue 1, pp. 76-84, 2014, Available at SSRN: https://ssrn.com/abstract=2422153 or http://dx.doi.org/10.1111/jacf.12056

Nuno Fernandes (Contact Author)

University of Navarra, IESE Business School ( email )

Avenida Pearson 21
Barcelona, 08034
Spain

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
4
Abstract Views
857
PlumX Metrics