The Impact of Sovereign Wealth Fund Investment on Firms’ Performance, Information Environment and Governance Quality

This thesis investigates the impact of sovereign wealth fund (SWF) investment on the stock returns, the information environment and the governance quality of target firms. These issued are addressed in three empirical chapters. In the first empirical chapter, we employ a Bayesian-based event-study analysis and find no evidence that SWF investment impacts the long–term abnormal returns of target firms. This finding suggests SWF passivity. In the second empirical chapter, we find strong empirical evidence that benchmark–adjusted stock liquidity is reduced subsequent to SWF investment. Such reduction in stock liquidity is not compensated by a positive equity premium, which suggests a deterioration of the information environment. The third empirical chapter reports that a large SWF ownership tends to give rise to a higher degree of earnings management by target firms. The issuing of seasoned equity and the pricing of such issuance may be a result of large private shareholders attempting to dilute SWF stakes.