Semester
Spring
Date of Graduation
2023
Document Type
Dissertation
Degree Type
PhD
College
Chambers College of Business and Economics
Department
Finance
Committee Chair
Ruiyuan Chen
Committee Member
Omrane Guedhami
Committee Member
Ann Marie Hibbert
Committee Member
Alexander Kurov
Committee Member
He Wang
Abstract
This dissertation comprises three chapters regarding the impact of sovereign wealth fund (SWF) investments on target firms’ corporate governance, cost of debt, and corporate social responsibility performance.
The first chapter is entitled “The Corporate Governance Consequences of Small Shareholdings: Evidence from Sovereign Wealth Fund Cross-Border Investments.” This chapter shows that firms’ corporate governance decrease following SWF cross-border investments. This impact holds for small SWF cross-border equity investments only, and is stronger for firms that are weakly governed and for those located in jurisdictions with weak shareholder protection. The negative relation is more pronounced when SWFs’ home countries have lower-quality investor protection, corruption control, governmental effectiveness, and law enforcement than their host countries. We find further that SWF investments are positively associated with target firms’ earnings management, and negatively associated with investment efficiency. Finally, target firm value is found to decrease after SWF investments.
The second chapter is entitled “Sovereign Wealth Funds and Cost of Debt: Evidence from Syndicated Loans.” This chapter provides evidence that the loan spread of target firms decreases after equity investment by SWFs. This result holds when we use alternative specifications, and address endogeneity issues. Moreover, the negative effect is more pronounced for borrowing firms with higher risk. We also show that SWFs help reduce the cost of debt when they have a strong relationship with the lead banks.
The third chapter is entitled “The CSR Balancing Act: The Impact of Sovereign Wealth Fund Investments on Investee Firms.” In this chapter, we show firms increase CSR engagement following investments by SWFs. This effect is more pronounced for SWFs with weaker governance structures, lower levels of transparency, and greater political motivations. Our findings provide support for the hypothesis that investee firms engage in CSR activities to counteract the negative image associated with SWF investments. This research highlights the importance of CSR as a means to mitigate the potential negative impacts of SWFs on investee firms.
Overall, this dissertation highlights the uniqueness and importance of SWFs and their various impact on target firms from the perspective of shareholders, creditors, and other stakeholders. It has important practition and policy implications for investors, SWF managers, and regulators.
Recommended Citation
Liu, Feiyu, "Sovereign Wealth Funds, Corporate Governance, and Corporate Performance" (2023). Graduate Theses, Dissertations, and Problem Reports. 11638.
https://researchrepository.wvu.edu/etd/11638