Abstract
Using a sample of 802 investments by 18 Sovereign Wealth Funds (SWFs) through November 2009, we examine whether SWFs impact value as investors in listed companies. While SWF investment announcements yield small but significantly positive stock returns, target firms experience much larger, significantly negative abnormal returns over the three years after investment. Despite buying large stakes through direct equity purchases, SWFs play little visible role in target firm corporate governance and rarely take seats on target firm boards. These and other results offer most support for the Constrained Foreign State Investor Hypothesis, predicting that foreign governments will be passive shareholders.
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