Sovereign Wealth Fund Investments in the Banking Industry

Luisa Anderloni () and Daniela Vandone ()

Departmental Working Papers from Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano

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.

Keywords: Sovereign Wealth Funds; Bank Profitability; Capital and ownership structure (search for similar items in EconPapers)
JEL-codes: G15 G23 G32 G38 (search for similar items in EconPapers)
Date: 2012-12-19
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Citations: View citations in EconPapers (1)

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