Bilateral political relations and sovereign wealth fund investment

Knill, April; Lee, Bong-Soo; Mauck, Nathan

doi:10.1016/j.jcorpfin.2011.11.002

Cited by 141 publications

(117 citation statements)

References 43 publications

(46 reference statements)

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“…The largest samples used in any type of SWF empirical studies are observed here. The next three articles (Candelon et al ., ; Avendaño and Santiso, ; Knill et al ., ) assess whether political and macroeconomic factors significantly influence observed SWF investment decisions. Heaney et al .…”

Section: How Swfs Make Target Selection and Portfolio Allocation Decimentioning

confidence: 99%

Rise of the Fiduciary State: A Survey of Sovereign Wealth Fund Research

Megginson

Fotak

2015

Journal of Economic Surveys

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We survey the literature documenting the rise of sovereign wealth funds (SWFs), which, with assets under management of over $5.4 trillion at year‐end 2014, are a major force in global finance. Research papers have analyzed the evolution of SWFs from stabilization funds to stand‐alone wealth management funds; we both survey this research and show that more than 25 countries have launched or proposed new SWFs since January 2008. The most salient and controversial feature of SWFs is that they are state‐owned; we survey the existing literature on state ownership and discuss what this predicts about the efficiency and beneficence of government control of SWF assets. We discuss the documented importance of SWF funding sources (oil sales revenues versus excess reserves from export earnings) and survey the normative literature describing how SWFs should allocate funds. We then summarize the empirical literature studying how SWFs actually do allocate funds—across asset classes, geographically, and across industries. We document that most SWF equity investments in publicly traded firms involve cross‐border purchases of sizeable minority stakes (median around 20%) in target firms, with a strong preference for investments in the financial sector. Next, we assess empirical studies examining the impact of SWF stock investments on target firm financial and operating performance, and find universal support for a positive announcement period stock price increase of 1–3%. This, however, is significantly lower than the 5% abnormal return documented for stock purchases by comparable privately owned financial investors in recent studies, indicating a “sovereign wealth fund discount.” We conclude by summarizing the lessons of SWF research and pointing out unresolved issues.

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Section: How Swfs Make Target Selection and Portfolio Allocation Decimentioning

confidence: 99%

Rise of the Fiduciary State: A Survey of Sovereign Wealth Fund Research

Megginson

Fotak

2015

Journal of Economic Surveys

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“…Firstly, some contributions focus on how SWFs' investments affect target firms' stock prices and performance. Market reactions around acquisitions, in shorter windows, tend to be significantly positive, meaning that market participants believe that SWFs will improve target firms' performance; instead, in the long run, most of the literature observes that SWFs do not improve firm value (Bortolotti et al, 2010;Knill et al, 2012a;Kotter and Lel, 2011), implying that they are passive investors and that there are other investment motivations beyond the maximization of the risk-return relationship (Knill et al, 2012b).…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

Lending, Investments and the Financial Crisis

Beccalli¹,

Poli²

2015

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“…That suggested that their investment rules are not entirely driven by profit maximizing objectives but have some political motivations behind them. Knill, Lee and Mauck (2012) agreed that political relations play a role in SWF decision making. In their empirical study they claim that contrary to predictions based on the foreign direct investment (FDI) and political relations literature, SWFs prefer to invest in nations with which they have weaker political relations and behave differently than rational investors who maximize return while minimizing risk.…”

Section: Sovereign Wealth Funds and The Foreign Policy Of The Statementioning

confidence: 99%

Political Significance of Sovereign Wealth Funds

Kamiński

2017

Political Players? Sovereign Wealth Funds’ Investments in Central and Eastern Europe

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Bilateral political relations and sovereign wealth fund investment

Cited by 141 publications

References 43 publications

Rise of the Fiduciary State: A Survey of Sovereign Wealth Fund Research

Rise of the Fiduciary State: A Survey of Sovereign Wealth Fund Research

Lending, Investments and the Financial Crisis

Political Significance of Sovereign Wealth Funds

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