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Sovereign Wealth Fund Investments in the Banking Industry

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  • Luisa ANDERLONI
  • Daniela VANDONE

Abstract

This paper aims to investigate the financial impact of Sovereign Wealth Fund (SWF) investments in the stocks of European and North American banks around the 2008 financial crisis. SWFs have gained great attention because of various concerns: their large size, lack of transparency, and, in principle, the potentially politicized nature of sovereign fund investments. Indeed SWFs disproportionately favor financial companies and during the crisis have become dominant players, providing significant capital to large banks in Europe and the US. Many arguments have been put forth regarding the potential positive and negative effects of SWF investments on global financial markets and on targeted companies. This paper, based on a hand collected database, aims to shed a light on the impact on financial performance (stock prices) and on economic performance (various ratios and growth rates) of SWF investments in banks. We compare the performance of SWF-backed banks with a sample of non- SWF-backed in two time periods (2004-2007 and 2008-2011) in order to verify the different hypotheses explaining superior or lower performance. This empirical study contributes to the academic literature that seeks to analyze the role of corporate governance structures on banks’ performance.

Suggested Citation

  • Luisa ANDERLONI & Daniela VANDONE, 2012. "Sovereign Wealth Fund Investments in the Banking Industry," Departmental Working Papers 2012-24, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    • Handle: RePEc:mil:wpdepa:2012-24
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    File URL: http://wp.demm.unimi.it/files/wp/2012/DEMM-2012_024wp.pdf
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    References listed on IDEAS

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    Cited by:

    1. Dariusz Urban, 2016. "The Investment Attractiveness of Companies Listed on the Warsaw Stock Exchange to Sovereign Wealth Funds," Acta Oeconomica, Akadémiai Kiadó, Hungary, vol. 66(2), pages 333-350, June.

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    More about this item

    Keywords

    Sovereign Wealth Funds; Bank Profitability; Capital and ownership structure;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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