Friends or foes?
Subtitle: the stock price impact of sovereign wealth fund investments and the price of keeping secrets
By: Jason Kotter and Ugur Lel.
Contributors: Lel, Ugur.
Series: International finance discussion papers -- no. 940; International finance discussion papers (Online) -- no. 940.
Publisher: Federal Reserve Board
Published: 2008
Place of publication: Washington, D.C
Language: eng
Format: Electronic resource
Description: "This paper examines the stock price impact of 163 announcements of Sovereign Wealth Fund (SWF) investments.  We document an average positive risk-adjusted return of 2.1 percent for target firms during two days surrounding SWF acquisition announcements.  The announcement effect is both statistically and economically significant.  A multivariate analysis shows that the degree of transparency of SWF activities is an important determinant of the market reaction, and both the SWF and the existing shareholders of the target firm benefit from improved SWF disclosure.  In addition, target firms' profitability, growth, and governance do not change significantly in the three-year period following the SWF investment relative to a control sample.  These results are robust to a battery of tests.  Overall, our findings suggest that SWF investments convey a positive signal to market participants about the target firm, increased SWF transparency is enjoyed by both the SWF and existing shareholders, and SWFs are passive investors"--Federal Reserve Board web site.
Notes: Title from PDF file as viewed on 6/18/2009.

Includes bibliographical references.

Also available in print.

System requirements: Adobe Acrobat Reader.

Mode of access: World Wide Web.