We analyze the impact of Sovereign Wealth Fund (SWF) equity investments on target firm operating performance. We use metrics from network analysis to investigate whether target firms, that are better connected each other by means of the SWF investments, extract benefits from this network in terms of higher operating performance. We examine 507 SWF acquisition deals worldwide in the time span between 2000 and 2011. We find that more central firms in the SWF-target firm network enjoy better operating performance. Indeed, firm centrality may result in preferential access to information, deal flow, expertise, contacts, and so on. In addition, our analysis points out that operating performance is higher: (i) the larger the stake acquired, (ii) if the investment is direct, rather than through subsidiaries or investment vehicles, (iii) if the acquisition is domestic and (iv) if the SWF is run by a politician. Overall, our results reveal that being a SWF target firm might not be enough to claim for better operating performance. Only when a firm can benefit from the network of both political and commercial connections created by SWFs, then target firms enjoy these benefits and gain in operating performance.
Sovereign Wealth Funds and Target Firms: does 'networking' matter?
MARINELLI, NICOLETTA;
2014-01-01
Abstract
We analyze the impact of Sovereign Wealth Fund (SWF) equity investments on target firm operating performance. We use metrics from network analysis to investigate whether target firms, that are better connected each other by means of the SWF investments, extract benefits from this network in terms of higher operating performance. We examine 507 SWF acquisition deals worldwide in the time span between 2000 and 2011. We find that more central firms in the SWF-target firm network enjoy better operating performance. Indeed, firm centrality may result in preferential access to information, deal flow, expertise, contacts, and so on. In addition, our analysis points out that operating performance is higher: (i) the larger the stake acquired, (ii) if the investment is direct, rather than through subsidiaries or investment vehicles, (iii) if the acquisition is domestic and (iv) if the SWF is run by a politician. Overall, our results reveal that being a SWF target firm might not be enough to claim for better operating performance. Only when a firm can benefit from the network of both political and commercial connections created by SWFs, then target firms enjoy these benefits and gain in operating performance.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
