Sovereign wealth funds and cost of debt: Evidence from syndicated loans

Chen, Ruiyuan (Ryan), Feiyu Liu and Zhao, Yijia (Eddie)

Journal of Corporate Finance, 2023, vol. 82, issue C

Abstract: We examine how sovereign wealth fund (SWF) investments affect target firms' cost of debt. Using a large sample across 39 countries from 2004 to 2019, and applying a difference-in-differences (DiD) approach, we find 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 connection with the lead banks.

Keywords: Sovereign wealth funds; Cost of debt; Syndicate loan (search for similar items in EconPapers)
JEL-codes: G32 G34 G35 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:82:y:2023:i:c:s0929119923000950

DOI: 10.1016/j.jcorpfin.2023.102446

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