Sovereign Wealth Funds: Good for Funding?

Abstract

Since the start of the financial crisis,
firms increasingly search for new finance
sources. Sovereign Wealth Funds – rapidly
growing government-owned investment vehicles
– are investing heavily in equity nowadays. We
aim to find out how stock markets respond to
their investments and disinvestments. When
analysing a global sample for the period January
2004 - July 2011, we find significantly positive
(negative) stock market returns on the
announcement of an investment (divestment).
Additionally, we find that the market reacts
stronger to announcements of divestments since
2008. This provides some evidence for the idea
that investors look more favourable upon
Sovereign Wealth Funds nowadays. It appears
that fears for too much corporate governance
impact have weakened. This opens up funding
opportunities for CFO’s of today’s moneyhungry
firms.