Sovereign Wealth Funds and Financial Stability

Sovereign Wealth Funds and Financial Stability—An Event Study Analysis

October 1, 2009

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Format: Chicago

Heiko Hesse, and Tao Sun. Sovereign Wealth Funds and Financial Stability—An Event Study Analysis, (USA: International Monetary Fund, 2009) accessed December 22, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper examines financial stability issues that arise from the increased presence of sovereign wealth funds (SWFs) in global financial markets by assessing whether and how stock markets react to the announcements of investments and divestments to firms by SWFs using an event study approach. Based on 166 publicly traceable events collected on investments and divestments by major SWFs during the period from 1990 to 2009, the paper evaluates the short-term financial impact of SWFs on selected public equity markets in which they invest. The impact is analyzed on different sectors (financial and nonfinancial), actions (buy and sell), market types (developed and emerging markets), and level of corporate governance (high and low score). Results, based on these 166 events, show that there was no significant destabilizing effect of SWFs on equity markets, which is consistent with anecdotal evidence.

Subject: Corporate governance, Emerging and frontier financial markets, Financial sector, Financial sector stability, Stock markets

Keywords: Investment, Sovereign wealth fund, SWF investment, WP

Publication Details

Pages:

17
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2009/239
Stock No:

WPIEA2009239
ISBN:

9781451873863
ISSN:

1018-5941

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