Shanghai, Dubai, Mumbai Or Goodbye?
AbstractStarting in 2007, Sovereign Wealth Funds (SWFs) from Asia and the Middle East have invested billions of dollars in major U.S. financial firms. The primary driving force behind their growth is rising commodity prices, in particular oil. Given that SWFs represent a relatively new, cash-rich investment group, we studied the public policy concerns with their investments, SWFs mode of entry, and how does the market react to the investment. SWFs lack of transparency with regards to their investment motives and governance structure is cause for concern. While taking full opportunity of depressed security prices as a result of the 2007-2008 financial crisis, they are also being prudent by investing mostly in preferred stocks and fixed-income convertible securities of large U.S. corporations that are followed by many analysts and are highly liquid. Despite investing handsomely in U.S. targets and adopting a hands-off approach toward management; the liquidity crisis continues to perpetuate the decline in SWF-targets’ stock price post-investment. Using an event study parameter approach, we found the short-run market reaction to be statistically insignificant in 11 out of 12 announcements of SWF investments; but in the months following the investment, SWF-targets underperform both the S&P500 and the Dow Jones Financial Services Index Fund.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Alexandru Ioan Cuza University, Faculty of Economics and Business Administration in its journal Review of Economic and Business Studies.
Volume (Year): (2009)
Issue (Month): 4 (November)
Stock Market; Sovereign Wealth Funds (SWFs); SWF-targets’ stock price post-investment;
Find related papers by JEL classification:
- G1 - Financial Economics - - General Financial Markets
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Kotter, Jason & Lel, Ugur, 2011. "Friends or foes? Target selection decisions of sovereign wealth funds and their consequences," Journal of Financial Economics, Elsevier, vol. 101(2), pages 360-381, August.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sireteanu Napoleon-Alexandru).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.