The long-term impact of sovereign wealth fund investments

Raphael Jonghyeon Park, Simon Xu, Francis In, Philip Inyeob Ji

Research output: Contribution to journalArticlepeer-review

13 Scopus citations

Abstract

In this study, we examine the long-term impact of sovereign wealth fund (SWF) investments on target firms' value, return volatility, and crash risk. We find that SWF investments generally underperform stock markets in the long run. Furthermore, the effect of SWF ownership critically depends on the level of investor protection in recipient countries. We show that domestic SWFs impart a stabilizing effect on the stock price of target firms in countries with low investor protection, but the effect is weaker for foreign SWFs. Moreover, SWF investments during the non-crisis period increase the crash risk of target firms, but the effect reverses during the crisis period.

Original languageEnglish
Pages (from-to)115-138
Number of pages24
JournalJournal of Financial Markets
Volume45
DOIs
StatePublished - Sep 2019

Keywords

  • Crash risk
  • Event study
  • Firm value
  • Sovereign wealth fund

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