SWF investments and debt maturity of target firms: An international evidence

Sovereign wealth fund investments and financial performance of target firms: The disciplinary role of debt in political agenda theory

“…The first proxy is SWF Ownership. We follow prior studies (e.g., Ghouma & Ouni [ 10 ]) and proxy SWF ownership as the percentage of shares held by the Norwegian SWF in the capital of the target firm after the acquisition. In contrast to Ghouma and Ouni [ 10 ], we focus on Ethical SWF in different target firms characterized by firms that do not involve in sinful products and services such as the production of Tobacco.…”

“…We follow prior studies (e.g., Ghouma & Ouni [ 10 ]) and proxy SWF ownership as the percentage of shares held by the Norwegian SWF in the capital of the target firm after the acquisition. In contrast to Ghouma and Ouni [ 10 ], we focus on Ethical SWF in different target firms characterized by firms that do not involve in sinful products and services such as the production of Tobacco. This proxy allows us to understand to what extent SWF's stake in target firms would increase societal and environmental goals towards increased financial performance or whether the political agenda of SWF would influence financial performance negatively.…”

“…Prior studies on SWF investments and financing decisions can be categorized into two streams. Scholars in the first stream have investigated the impact of SWFs on the cost of corporate borrowings [ [6] , [7] , [8] , [9] , [10] , [11] ], equity pricing, firm ESG reputation risk, return-to-risk performance, national culture, and firm value [ 1 , 2 , 6 , 7 , 11 , 12 ]. Godsell [ 11 ] submits that financial reporting quality becomes weak after SWF investments.…”

“…However, more answers are yet to be provided on whether sovereign wealth funds are associated with capital structure. Prior studies have majorly established that SWFs matter for the cost of capital [ [9] , [10] , [11] ], suggesting that SWFs could impact access to finance and may distort the financing structure of firms.…”

“…While the contracting theoretical view (i.e., monitoring hypothesis) follows a positive impact of SWF on the corporate outcome [ 10 , 26 , 27 ], the predatory theoretical view (i.e., political agenda theory) describes a negative impact of SWF on corporate outcomes [ 28 , 29 ]. Our findings clear these theoretical debates that the contracting view is established when SWF ownership is approximately 2% or less.…”