Do investment determinants and effects vary across sovereign wealth fund categories? A firm-level analysis

Abstract

This paper investigates whether determinants and effects of sovereign wealth funds (SWFs) investment vary across types of funds. To address this issue, we classify SWFs based on their scope and the origin of wealth. We find that saving and reserve funds and non-commodity funds pick better-performing firms. Furthermore, effects vary among SWF categories. In fact, saving and reserve funds assume a passive role in managing investments, unlike multi-objective and development funds which have detrimental effects on the target companies. As a whole, these findings confirm that heterogeneity of SWFs in terms of how they target firms and activism matters.