The impact of sovereign wealth fund ownership on the financial performance of firms: the evidence from emerging markets

176 2017, XX, 3 Finance DOI: 10.15240/ ul/001/2017-3-012 In oduc ion So e eign Weal h Funds (SWFs) a e s ill conside ed o be new-bo n ins i u ional in es o s, in in e na ional i nancial ma ke s, as well as inno a i e in es men ehicles, despi e hei ela i ely long his o y. Se e al unds ha e been ope a ing a a global le el o mo e han i y yea s, howe e he numbe o hose c ea ed a e he yea 2000 ep esen s he majo i y o he o al in exis ence. Fo many yea s, hese s a e- un unds ha e been almos anonymous in es o s, exis ing in he shadows, main aining a low p o i le in he public eye. SWFs ha e been ega ded as in es men ehicles es ablished in o de o manage, in a a ional and p o i - o ien ed way, pools o na ional weal h o u u e gene a ions. These unds gained public a en ion du ing he las i nancial c isis, playing he ole o in es o s o las eso o op global i nancial ins i u ions. Nowadays, SWFs a e among he mos impo an ins i u ional in es o s in global i nancial ma ke s, and cons i u e a solid elemen in he a chi ec u e o he in e na ional i nancial sa e y ne . Simila ly o o he i nancial ins i u ions, So e eign Weal h Funds possess huge amoun s o capi al. Du ing he las decade he unds ha e doubled hei asse s unde managemen , and, in spi e o losses acc ued in consequence o he las i nancial c isis, by he end o 2014 hese amoun ed o o e 7 billion US dolla s. Wha dis inguishes hem he mos om o he i nancial ins i u ions is he ac ha hey a e owned, managed and con olled by so e eign s a es, ha e limi ed liquidi y needs, a lowe - han-ma ke -a e age-le el o edemp ion isk, a long- e m, in e gene a ional in es men ho izon and ela i ely high isk ole ance. So e eign Weal h Funds, because hey a e hyb id in na u e, combine p i a e sec o me hods o in es men (e.g. coming om hedge unds and pension unds), wi h public- sec o goals de e mined by go e nmen s. Gi en he high le el o opaci y in SWFs’ decision p ocessing, he lack o anspa ency in hei po olio alloca ion, and hei inc easing capi al in ol emen wi hin a wide ange o asse classes, a u he unde s anding o he in es men beha io o hese s a e- un in es men ehicles is so ely needed. In he las decade, se e al a icles ha e been dedica ed o analyzing he ac o s de e mining asse alloca ion among his g oup o in es o s, howe e he e a e issues which s ill need o be examined. One o he unanswe ed ques ions is he ela ion be ween pu chasing equi y s akes in companies, and changes in he i nancial pe o mance o a a ge ed i m. The empi ical i ndings ha e p o ided e idence ha public companies, due o he ac ha hey ca e o he in e es s o poli icians and no only o hei sha eholde s, a e ela i ely less e i cien wi h compa ison o sole p i a e i ms. Thus hese unds a e likely o ha e objec i es di e en han ob aining he highes possible i nancial e u n on an in es men . In consequence, he e a e g ounds o belie e ha companies owned by a SWF expe ience a educ ion in hei i nancial pe o mance. The main goal o his pape is o answe he ques ion o whe he in es men om So e eign Weal h Funds de e mines changes in co po a e i nancial pe o mance. This pape is pa o a la ge p ojec aimed a unde s anding he i nancial aspec s o SWFs’ ac i i y in eme ging ma ke s, especially as ega ds hei in es men p ac ices and pe o mance. P e ious pape s by he au ho ha e been ocused on ac o s de e mining p opensi y o in es in companies lis ed on he Wa saw S ock Exchange and he S ock Exchange in Sao Paulo. This s udy con ibu es o ongoing esea ch in he i eld o s udies ela ed o i nancial aspec s o SWFs’ beha io by p o iding empi ical e idence abou he impac o SWFs’ in es men in he co po a e THE IMPACT OF SOVEREIGN WEALTH FUND OWNERSHIP ON THE FINANCIAL PERFORMANCE OF FIRMS: THE EVIDENCE FROM EMERGING MARKETS Da iusz U ban EM_3_2017.indd 176EM_3_2017.indd 176 7.9.2017 10:34:347.9.2017 10:34:34 177 3, XX, 2017 Finance i nancial pe o mance o a ge ed i ms om he one o eme ging ma ke s in Cen al and Eas e n Eu opean Coun ies. The emainde o his pape is o ganized in he ollowing manne : Sec ion 1 p o ides heo e ical backg ound o he esea ch by discussing he ela ion be ween ins i u ional in es o owne ship and i nancial pe o mance o he company. Sec ion 2 desc ibes he me hodology and da a used in his s udy. Sec ion 3 p esen s and discusses empi ical i ndings. The a icle concludes by poin ing ou a enues o u u e esea ch. 1. Li e a u e Re iew 1.1 Ins i u ional In es men in Global Financial Ma ke s P i a iza ion as a co e go e nmen policy is no only well documen ed in economic li e a u e, bu has also been a key componen o he ans o ma ion p ocess in coun ies changing hei economic o ma om one ha is cen ally planned o one ha is ma ke o ien ed. The issue o p i a iza ion is especially ele an o coun ies om Cen al and Eas e n Eu ope, whe e om 1989 onwa ds, we can obse e p ocesses o massi e e ea o s a es om many a eas p e iously ega ded a p io i as s a e-owned and s a e- egula ed. Mo eo e o se e al decades p i a iza ion along wi h de egula ions in many sec o s, has been he answe and he an ido e gi en by leading global i nancial ins i u ions o de eloping economies expe iencing budge , i nancial o economic di i cul ies. Howe e , looking a he global pic u e as a whole, we can i nd e idence ha o e he 2001-2012 pe iod go e nmen s acqui ed mo e asse s h ough s ock pu chases han hey sold h ough sha e issue p i a iza ions and di ec sales. The key ac o ha seems o explain hese ob ious con adic ions is ha he go e nmen pu chases o equi y ha e ecen ly been conduc ed mos ly by s a e en i ies ac ing as in es o s a he han owne s. Much o his s a e in es men was channeled h ough special in es men ehicles – So e eign Weal h Funds, and he as bulk o s ock pu chases ha e been c oss bo de ansac ions. SWFs ha e been buying non-con olling s akes in o eign and domes ic companies in o de o ealize a long- e m i nancial e u n, a he han o own and ope a e hese businesses as s a e en e p ises (Bo olo i, Fo ak, & Megginson, 2014). The ise and g ow h o So e eign Weal h Funds e l ec a b oade phenomenon o equi y owne ship concen a ions wi hin a g oup o ins i u ional in es o s a he han in he hands o indi iduals. Today ins i u ional in es o s hold a ound 60% o all publically lis ed s ock in he Uni ed S a es, a ound 72% in Japan and a ound 89% in he UK (Çelik & Isaksson, 2014). The e is no commonly accep ed de i ni ion o an ins i u ional in es o hus a ; howe e in he b oades sense, “ins i u ional in es o ” e e s o h ee ca ego ies o en i ies. The i s g oup o ins i u ional in es o s e e s o adi ional ins i u ional in es o s and comp ises pension unds, in es men unds and insu ance companies. The second g oup, labeled al e na i e ins i u ional in es o s, consis s o hedge unds, p i a e equi y unds, exchange- aded unds and so e eign weal h unds. The hi d g oup a e asse manage s, who in es in hei clien s’ names (Çelik & Isaksson, 2014). As a g oup, ins i u ional in es o s a e ega ded as a common ea u e o mode n capi al ma ke s, playing he majo ole in he in e na ionaliza ion o i nancial ma ke s (Aga wal, 2009). Ins i u ional in es o s assume an inc easing ole in global capi al ma ke s as well as he main o ce shaping he new i nancial landscape (Mizuno, 2010). Gi en hei size, es ima ions sugges ha hey accoun o mo e han hal o global equi y ma ke alue wo ldwide, and ha when hese in es o s ac oge he , hey can shape he i nancial ma ke s in o he o m hey desi e (Roge s, 2014). Fo eign ins i u ional in es o s a e quan i a i ely a e y impo an g oup especially in eme ging ma ke s (F ankel & Menkho , 2003), whe e hey ha e become a signi i can channel p o iding capi al (Chang, Hsiao, & Tsai, 2013). This g oup o in es o s is g owing as in eme ging ma ke s, whe e SWFs s ill p edomina e as a sou ce o long- e m capi al (Della C oce, S ewa , & Ye mo, 2011). Ins i u ional in es o s as a whole, wi h So e eign Weal h Funds playing a signi i can ole, a e also he key elemen o oday’s global economic and i nancial landscape, which has been desc ibed as a i ducia y capi alism. This e m, which was used o he i s ime by Hawley and Williams, cha ac e izes a new pa e n o owne ship in which ins i u ions such as e.g. pension unds and mu ual unds, own equi y on behal o o he s e.g. e i ees o u u e e i ees (Hawley & Willams, 1997). The i ducia y capi alism is ypi i ed by highly EM_3_2017.indd 177EM_3_2017.indd 177 7.9.2017 10:34:347.9.2017 10:34:34 178 2017, XX, 3 Finance di e si i ed equi y holdings by a la ge numbe o ins i u ional owne s, howe e holdings a e in ac , concen a ed in he hands o a ela i ely small numbe o he e y la ges en i ies – uni e sal owne s (Hawley & Willams, 2007). These i ducia y ins i u ions, wi h he No wegian So e eign Weal h Fund being a leading example, a e highly di e si i ed in es o s, holding po olios ha ep esen almos e e y asse class om almos e e y egional i nancial ma ke . Simila ly o So e eign Weal h Funds, o he ela i ely new in ui ions ha e ecen ly become impo an equi y owne s alongside he mo e adi ional in es o s, such as pension unds and in es men unds. In a simila ein, Bo olo i e al. (2014) sugges ha SWFs a e he single mos impo an exp ession o he o ce ha can be called he ise o he i ducia y s a e. Wha makes his phenomenon especially signi i can is he ac ha he la ges numbe o go e nmen equi y pu chases ha e been acquisi ions in o eign companies, whe e a s a e pu chase has limi ed abili y o exe cise any so e eign egula o y o supe iso y powe . SWFs as s a e sha eholde s ha e no mo e au ho i y o moni o a ge i m manage s han do p i a e in es o s, especially i hey a e poli ically cons ained. These de elopmen s ha e gi en new impe us o he discussion abou he ole o So e eign Weal h Funds in publicly lis ed companies, wi h special emphasis on he ela ion be ween SWFs’ owne ship, and he i nancial pe o mance o companies. Due o he ac ha in e ms o sha eholding size, hese s a e- un unds a e e y di e en om indi idual in es o s, a ques ion a ises as o whe he ins i u ional owne ship in l uences a company’s i nancial pe o mance. The empi ical i ndings, so a , do no p o ide clea a gumen s ha allow us o d aw unambiguous conclusions on his issue. 1.2 Ins i u ional Owne s and he Financial Pe o mance o a Company A la ge body o esea ch sugges s ha go e nmen s usually ha e a nega i e impac on a i m’s i nancial pe o mance, which imp o es wi h p i a iza ion (Es in, Hanousek, Kočenda, & S ejne , 2009; Sun & Tong, 2003; Shi ley & Walsh, 2001). So e eign Weal h Funds, due o hei poli ical connec ions, a e likely o ha e objec i es o he han ob aining he highes possible i nancial e u n. Hence, a company wi h a SWF as a sha eholde migh be ela i ely ine i cien and expe ience educ ions in hei ma ke alue, because manage s will ca e also o he in e es s o poli icians (Fe nandes, 2014). In case o public-p i a e owne ship, empi ical i ndings o esea ch sugges s ha such mixed owne ship also has a nega i e impac on he alue o he company (Shi ley & Walsh, 2001; Bo iso a, B ockam, Sales, & Zago che , 2012). Howe e looking a his issue om a di e en pe spec i e i , is likely ha SWFs may be able o inc ease hei pe o mance and he alue o he companies hey in es in by opening doo s o new ma ke s, and by helping hem o ma ke hei p oduc s in hei home ma ke s. These s a e- un unds, due o hei long- e m in es men ho izon, can signi i can ly elax i nancing cons ain s o i ms, he eby allowing hem o unde ake p omising in es men s wi h mo e dis an payo s. Thus, i such ad an ages a e impo an , one possible ou come is ha companies wi h SWF owne ship become mo e e i cien and expe ience inc eases in hei ma ke alue (Fe nandes, 2014). Simila conclusions o hose p esen ed abo e can be d awn om he nex s and o li e a u e ha ocuses on he ela ion be ween ins i u ional in es o owne ship and he i nancial pe o mance o i ms. The p edic ion ha la ge ins i u ional owne s can ha e a posi i e in l uence on he alue o he company a ises om he assump ion ha hese in es o s ha e an incen i e o and can e i cien ly moni o inside s, educing he likelihood ha inside s will make sub-op imal decisions (Na issi & Naike , 2006). Woid ke (2002) i nds ha Tobin’s Q is posi i ely ela ed o he owne ship p opo ion o he p i a e pension und. Fo public pension unds, such ela ions we e nega i e. Simila ly Co ne , Ma cus, Saunde s and Teh anian (2007) i nd a signi i can ela ion be ween a company’s ope a ion cash l ow e u ns and bo h he sha eholding p opo ion and he numbe o in es o s, o hose ins i u ional in es o s less likely o ha e a business ela ionship wi h he i ms. In a simila ein, he empi ical i nding o Yuan, Xiao and Zou (2008) sugges ha equi y owne ship by mu ual unds has a posi i e e ec o i m pe o mance. Elyasiani and Jia, analyzing he dis ibu ion o ins i u ional owne ship, ha e ound ha he e is a posi i e ela ionship be ween company pe o mance and ins i u ional owne ship s abili y (Elyasiani & EM_3_2017.indd 178EM_3_2017.indd 178 7.9.2017 10:34:347.9.2017 10:34:34 179 3, XX, 2017 Finance Jia, 2010). The empi ical esul s p esen ed by Hsu and Wang (2014) show ha he inc easing s abili y o ins i u ional holdings is ela ed o be e company pe o mance. On he o he hand, he li e a u e p o ides e idence on he nega i e ela ionship be ween ins i u ional owne ship and company pe o mance; e.g. he empi ical i ndings o Liang, Lin and Huang (2011) sugges ha ins i u ional sha eholdings nega i ely a ec i m pe o mance. Also Cha eddine and Elma zougui (2010) a gue ha ins i u ional owne ship has a signi i can nega i e impac on i m pe o mance as measu ed by a p oxy o Tobin’s Q. Ruiz-Mallo quí and San ana- Ma ín (2011), using a sample o he lis ed companies in Spain, p esen e idence ha he ela ionship be ween ins i u ional in es o s and i m pe o mance is nega i e o he banking sec o due o he ac ha banks in pu sui o achie ing p o i s ha e de imen al in l uence on company pe o mance. In con as , he o he s udies i nd no signi i can ela ion be ween he abo e-men ioned a iables (Faccio & Lase , 2000; Duggal & Milla 1999). Summing up, he impac o ins i u ional s ock owne ship on i m pe o mance is s ill unclea . While he mo i es o c ea ing So e eign Weal h Funds and mac oeconomics p o i s o he domes ic economy as well as o anspa ency and geopoli ical conce ns a e well ecognized in he li e a u e (see e.g. Beck & Fido a, 2008; Sun & Hesse, 2009; Sedláček, 2010; Quad io Cu zio & Miceli, 2010; U ban, 2011; Ji ánko á, 2012; Ćuso ić, 2012; Cas elli & Scaccia illani, 2012; Alhashel, 2015), many ques ions conce ning he i nancial aspec s o unds’ ac i i ies s ill emain ela i ely unanswe ed. Mo eo e , he empi ical esul s ound in he li e a u e a e con o e sial wi h e e ence o he sho e sus he long e m, as well as o in es men and di es men issues which a e ela i ely spa se, mainly due o di i cul ies in ob aining comp ehensi e and sys ema ic da a (Heaney, Li, & Valencia, 2011) and in o ma ion gaps (Cia lone & Micelli, 2014). Knill, Lee and Mauck (2012), looking a he a isk- ewa d pe o mance o a ge companies, a gue ha SWFs do no b ing bene i s o he companies hey in es ed in, as o he ins i u ional in es o s do. Fo ak, Bo olo i, Megginson and Mi acky (2008) i nd e idence sugges ing ha in he long e m hese s a e- un unds a e alue des oying. Bo olo i, Fo ak and Megginson (2013) a gue ha companies a ge ed by ac i e SWFs end o achie e an abno mal e u n o e he long e m, while companies a ge ed by passi e SWFs end o unde pe o m. Dewen e , Han and Mala es a (2010) sugges ha o e a i e yea in es men ho izon he e exis s mixed posi i e e idence on he ela ion be ween SWF owne ship and he s ock pe o mance o a ge ed i ms, which is consis en wi h Ko e and Lel’s (2011) i ndings o ze o- e u ns o e he long un. The e a e o he pape s, howe e , ha ha e ound ha SWFs b ing alue o hei a ge i ms. The empi ical i ndings ega ding he s ock pe o mance o a ge companies sugges ha he e a e posi i e abno mal e u ns a ound he day o in es men announcemen (Ko e & Lel, 2011; Fo ak, Bo olo i, Megginson, & Mi acky, 2008; Raymond, 2008). In simila ein, Fe nandes (2011) a gues ha he e is an SWF p emium; companies wi h he und as a sha eholde ha e 10-15% highe alues han compa able i ms, ce e is pa ibus. Be oni and Lugo (2014) i nd ha he C edi De aul Sp ead (CDS) o a ge companies d ops ollowing a SWF’s in es men . Fe nandes (2014) p o ides s a is ically signi i can e idence o bo h inc eases in a company’s alue ollowing SWF in es men s, as well as signi i can imp o emen s in ope a ional pe o mance. Summing up, we can see ha he spec um o empi ical i ndings on he ela ionship be ween ins i u ional in es o s and he i nancial pe o mance o a a ge company is e y wide and dispe sed. Addi ionally, p e ious esea ch has been ocused mainly on de eloped ma ke s. The e o e, he e is a need o deepe in es iga ion, especially on eme ging ma ke s, o each mo e obus conclusions. 2. Me hodology and Da a 2.1 Sample Selec ion The sample ini ially comp ised all companies lis ed on he Wa saw S ock Exchange. Th ee es ic ions we e hen applied. Fi s i nancial companies (e.g. banks, insu ance and i nancial companies) we e excluded as hey end o ha e capi al s uc u es di e en om o he companies. Secondly, he da a base was es ic ed o companies ha ha e been lis ed o a leas one ull yea as o he end o 2013, o ensu e ha i s pe o mance and he capi al s uc u e a e no signi i can ly a ec ed by he new lis ing, which may ha e an impac on he in e p e a ion o esul s. Finally, companies wi h EM_3_2017.indd 179EM_3_2017.indd 179 7.9.2017 10:34:357.9.2017 10:34:35 180 2017, XX, 3 Finance missing da a ha e been excluded. The abo e c i e ia yielded a usable sample o 336 i ms. Wi hin his g oup, using a unique So e eign Weal h Funds Ins i u e da abase, 36 i ms we e iden i i ed as a ge ed o in es men by So e eign Weal h Funds. The sample o Polish companies ep esen s o e 80% o he o al companies om Cen al and Eas e n Eu opean Coun ies ha we e chosen o in es men in 2013. The lack o da a o p e ious yea s does no allow o he c ea ion o panel da a, so a . All i nancial indica o s cha ac e izing lis ed companies ha e been ob ained om S ock G ound, p o ided by No o ia Se ices. 2.2 Va iables The key a iables o in e es a e measu es o he i m’s pe o mance: e u n on equi y (ROE), e u n on in es ed capi al (ROIC), e u n on asse (ROA), and So e eign Weal h Funds` owne ship in he company SWF. Fo SWF we used a dummy a iable (SWF_1), and a a iable ep esen ing he pe cen age o owne ship igh s (SWF_2). We also included o e 1% o an owne ship a iable (SWF_3) o examine he p esence o owne ship e ec a e a ce ain h eshold. Co ne e al. (2007) a gue ha using ope a ing pe o mance measu es may o e some ad an ages o e Tobins’ Q. Fi s , i is a mo e ocused indica o o he cu en pe o mance o he company, and unlike Tobins’ Q, i is no a ec ed by p ice changes associa ed wi h he an icipa ed co po a e akeo e e en s o o he g ow h oppo uni ies. Second, Tobins’ Q may be mo e suscep ible o endogenei y p oblems i in es o s chase g ow h s ocks o ecen ma ke winne s. Despi e he abo emen ioned disad an ages, we included a a iable P_BV ep esen ing p ice o book he alue o he company. This allowed us o analyze he po en ial impac o SWF’s owne ship in he company on i s ma ke pe o mance. In o de o con ol he o he possible de e minan s o company pe o mance, which we e no cap u ed by he owne ship a iable, we also included some obse ed company cha ac e is ics as con ol a iables. The con ol a iables used in he s udy ha e been selec ed wi h e e ence o hose employed in ea lie empi ical s udies; a iables ha ha e been shown o be ela ed o in e na ional in es men choices (see e.g. Fe nandes, 2011). We used he size o he company, i s i nancial le e age, annual s ock e u n, and g ow h oppo uni ies as he igh -hand side a iables. The desc ip i e s a is ics o a iables a e p esen ed in Tab. 1. The size o he company has a signi i can howe e ambiguous e ec on company pe o mance. On one hand, la ge companies can be less e i cien han smalle ones because o loss o con ol by op manage s o e s a egic and ope a ional ac i i ies wi hin he i m. On he o he hand, la ge i ms may u n ou o ha e be e pe o mance as hey a e likely o exploi economies o scale, employ mo e skilled manage s and ha e he o maliza ion o p ocedu es (Kuma , 2004). We used he loga i hm o o al asse s (SIZE) o con ol company size. The cos o capi al de i ed om le e age being used by he company can a ec hei i nancial pe o mance in di e en ways, Va iables Obs. Mean S d.De . Min Max ROE ROA ROIC PBV SWF_1 SWF_2 SWF_3 PERFORMANCE SIZE LEVERAGE GROWTH_OPP 321 308 278 333 336 336 336 319 309 334 317 1 0.9999 1 1 0.1071429 0.2173512 0.2047917 -3.436439 19.83706 2.925451 8.460868 4.026468 2.775469 4.066483 2.985078 0.3097561 0.7663999 0.7654408 13.44888 1.681403 31.70677 37.88543 -30.51854 -18.38241 -41.64627 -1.656082 0 0 0 -52.7072 12.97876 -2.290817 -99.32204 36.33857 26.5733 37.25245 44.28933 1 5 5 79.81244 25.29686 58.2288 258.5533 Sou ce: own calcula ions Tab. 1: Desc ip i e s a is ics o a iables EM_3_2017.indd 180EM_3_2017.indd 180 7.9.2017 10:34:357.9.2017 10:34:35 181 3, XX, 2017 Finance including ax shield, a highe business ope a ing isk and highes in e es bu den (Mo ck, Shlei e , & Vishny, 1988). Gi en his, including his a iable (LEVERAGE) in he model seems o be easonable. We measu e le e age as he deb o asse a io, which equals he book alue o o al deb di ided by he book alue o o al asse s. The lagged annual s ock e u n o he company (PERFORMANCE) is likely o cap u e he ma ke ’s expec a ions on he u u e pe o mance o he company, and he e o e, o accoun o he possibili y ha SWFs only selec companies wi h good pe o mance o in es in, we included his a iable in he model (Yuan, Xiao, & Zou, 2008). The e o e, a e con olling o his a iable, an obse ed posi i e coe i cien on SWF is mo e likely o e l ec he e ec o SWFs’ owne ship on company i nancial pe o mance, a he he o he way a ound. The nex a iable, g ow h oppo uni ies (GROWTH_ OPP), e l ec he possibili y ha he und p e e s companies wi h a highe han a e age inc ease o sales, o in es in. Thus, o con ol o his a iable, a sales g ow h a e is included, simila o ha used by Elyasiani and Jia (2010) and Fe nandes (2014). 2.3 The Model In o de o suppo a hypo hesis abou he ela ionship be ween SWFs’ owne ship and he i nancial pe o mance o he company, we un eg essions in which he company’s ROE, ROA, ROIC and P_BV we e a unc ion o a ious igh -hand side a iables, discussed in he p e ious sec ion. The ela ionship be ween he in es o ’s capi al in ol emen and he i nancial pe o mance o he company, howe e , as p e ious esea ch sugges s, is subjec o a po en ial simul anei y bias. The ins i u ional in es o s migh be a ac ed o companies wi h a supe io ope a ing pe o mance, and as a consequence o his, a posi i e associa ion be ween in es o s’ owne ship and i nancial pe o mance can be obse ed e en i ha owne ship is no di ec ly bene i cial o pe o mance. To elimina e his po en ial simul anei y bias we employed se e al ools. Fi s , we used bo h accoun ing and ma ke measu es o he i nancial pe o mance o companies ones as le -hand a iables. Secondly, we no malized a company’s ROA, ROE, ROIC and P_BV by he ma ke -a e ages, which elimina ed ela ions be ween ela i e pe o mance and a i m’s cha ac e is ics. Thi dly, we included a lag a iable e l ec ing e u n on s ock o e he p e ious yea , a lag a iable o asse s and a lag a iable o g ow h oppo uni ies. We also used a lag measu e o SWFs’ owne ship by one yea . This lag mi iga es simul anei y issues and allowed us o e i y he hypo hesis ha SWFs owne ship imp o es company i nancial pe o mance o e he hypo hesis ha SWFs inc ease holdings in companies wi h be e ecen i nancial pe o mance. I SWFs do e ec managemen decisions, and because o ha ha e a posi i e impac on i nancial pe o mance a ge i ms, hey p esumably would do so p io o he yea o be e pe o mance, which is consis en wi h he use o a lag. As a consequence o he adjus men s desc ibed abo e, he equa ions o model eg essions a e as ollows: Yi,2014 = ß0+ß1SWFi,2013+ß2PERFORMANCEi,2013+ + ß3SIZEi,2013+ß4LEVERAGEi,2013+ + ß5GROWTH_OPPi,2013+u2013 (1) whe e: Yi,2014 is ROE, ROIC, ROA and P_BV espec i ely (in he ollowing eg essions), and a iable SWFi,2013 akes he o m o SWF_1, SWF_2 and SWF_3 in each eg ession o a dependen a iable, wi h u as he means e o e m. Addi ionally, o each o he dependen a iables we also es ima ed eg essions wi h he use o inc emen al le -hand a iables o analyze he po en ial in l uence o SWF owne ship on changes in i nancial pe o mance, a he han on he le el o i nancial a iables. Selec ed es ima ion esul s, hose a bi a ily chosen o p esen as bes in e ms o signi i cance o pa ame e s and R2, a e p esen ed in Tab. 2 and Tab. 3. All es ima ions and calcula ions ha e been made wi h he use o STATA. 3. Empi ical Findings and Discussion Looking a he esul s collec i ely, we can see he mixed e idence o a ela ionship be ween So e eign Weal h Fund in es men and he i nancial pe o mance o companies. Fi s , in es ima ions using he absolu e le el o indica o as a le hand a iable, we obse e a posi i e howe e no s a is ically signi i can impac o in es men , while in es ima ions using del a ROE, he ela ionship seems o be nega i e. In models: (4), (6) and (8), he a iable SWF is s a is ically signi i can a 5% and 1% EM_3_2017.indd 181EM_3_2017.indd 181 7.9.2017 10:34:357.9.2017 10:34:35 182 2017, XX, 3 Finance espec i ely, sugges ing ha SWF in es men in -1 yea indica es he dec ease o e u n on equi y in he ollowing yea . The esul s a e consis en wi h hose p esen ed by Knill, Lee and Mauck (2012). Secondly, he p esen ed empi ical esul s sugges ha a iable SWF seems o be be e in p edic ing changes o pe o mance a he han an absolu e le el o indica o s. This conclusion seems o be a p omising and easonable a enue o he u u e esea ch. Thi dly, simila eg essions (no epo ed) ha e been un wi h o he a iables ep esen ing he i nancial pe o mance o company, i.e. e u n on in es ed capi al, e u n on asse s, as le hand a iables. The i ndings do no p o ide any e idence o suppo hypo heses on he ela ionship be ween capi al in ol emen o he SWF and he i nancial pe o mance o he company as well as a obus ness es o his analysis. Among se e al explana ions o such a si ua ion, wo migh be especially impo an ones. Fi s , a one yea lag be ween unds’ in es men and measu ing changes in i nancial pe o mance o companies migh no be enough o bene i s o SWFs’ in es men o be isible. A he p esen , due o he da abase, such a limi a ion can’ be o e come. Fu he esea ch migh also be based on panel da a wi h a wide ange o companies om di e en eme ging ma ke s. Secondly, SWFs as new in es o s in companies migh in l uence manage s o ac di e en ly wi h sho - e m i nancial pe o mance cos s o his change. As ega ds o o he a iables, he le el o deb in he company, measu ed by le e age a io, has a posi i e in l uence o ROE wi h a s a is ically signi i can 1% le el in all eg essions. These esul s as consis en wi h a heo y o i nance ha poin s ou he posi i e impac o i nancial le e age on he i nancial pe o mance o a company. The a iable GROWTH_OPP hold only in Δ ROE eg essions, which sugges s ha he inc ease o sales in -1 yea Va iables (1) ROE (2) Δ ROE (3) ROE (4) Δ ROE SWF_1 0.6008087 (0.102) -0.3760626 (0.249) -- SWF_2 -- 0.0675494 (0.597) -0.2818022 (0.013) SWF_3 ---- PERFORMANCE 0.047909 (0.060) 0.0422848 (0.235) 0.484412 (0.060) 0.0431408 (0.227) SIZE -0.2181708 (0.029) -0.0504923 (0.635) -0.1877548 (0.055) -0.0578668 (0.574) LEVERAGE 0.638005 (0.000) 0.102362 (0.000) 0.63862 (0.000) 0.1023649 (0.000) GROWTH_OPP 0.005206 (0.992) -0.0169462 (0.007) 0.006599 (0.900) -0.0168639 (0.007) _cons 5.307779 (0.009) 1.163174 (0.592) 4.76111 (0.017) 1.334118 (0.530) R20.4049 0.6291 0.4023 0.6308 Obse a ions 287 280 287 280 Sou ce: own calcula ions No es: This able p esen s es ima es o coe i cien s o he eg ession o ROE and Δ ROE espec i ely. Models (1) and (2) p esen esul s using a dummy a iable o SWF in es men ha equals 1 i he e is equi y in es men , and 0 o he wise; models (3) and (4) using a pe cen age o SWF owne ship, models (5) and (6) using a pe cen age o la ge in es men by he und wi h h eshold es ic ions (o e 1%). Models (7) and (8) p esen es ima ions wi h he use o backwa d- and o wa d-s epwise selec ion. All speci i ca ions use s anda d e o s co ec ed o he e oskedas ici y. In pa en heses a e -s a is ics whe e a P- alue is epo ed. Tab. 2: SWF owne ship and pe o mance o he company (Pa 1) EM_3_2017.indd 182EM_3_2017.indd 182 7.9.2017 10:34:357.9.2017 10:34:35 183 3, XX, 2017 Finance dec eases he change o ROE in he ollowing yea . Analyzing he po olio o p oduc s and he ma gin o sales seems o be he na u al a enue o u u e esea ch in o de o answe he ques ion on he abo e ela ionship. The coe i cien o a iable SIZE is nega i e in all es ima ions, which sugges s ha he size o he company measu ed by he loga i hm o asse s, has a nega i e in l uence on ROE, howe e he coe i cien holds s a is ical signi i cance only in models (1) and (7). Finally, he a iable PERFORMANCE seems o ha e a posi i e impac on equi y e u ns, sugges ing ha he e u n on a company’s s ocks in he p e ious yea in l uences he changes o e u n on equi y he ollowing yea , howe e his hypo hesis can’ be suppo ed due o a lack o s a is ical signi i cance o coe i cien in all eg essions. The R2 is be ween 40.21% and 40.49% o es ima ions wi h ROA as a le -hand a iable, and om 61.33% o 63.09% in models wi h Δ ROE. Con a y o he ambiguous and ela i ely weak esul (in e ms o s a is ical signi i cance) o he es ima ions based on he accoun ing measu es o i nancial pe o mance, he es ima ions using he ma ke a iable P_BV seem o p o ide a ela i ely clea pic u e o he ela ionship be ween So e eign Weal h Funds’ owne ship and he i nancial pe o mance o he a ge ed company. In all eigh models, he da a sugges s he posi i e impac o a und’s owne ship on p ice o book alue o he i m. In ou models, he coe i cien o he SWF a iable a e s a is ically signi i can wi h p = 1%. I may sugges ha , ce e is pa ibus, companies wi h SWF as in es o s ha e highe ma ke alua ions in compa ison o he companies no a ge ed by he und. The ob ained esul s a e consis en wi h hose p esen ed by Fe nandes (2014), howe e in his esea ch he posi i e impac o owne ship is no limi ed o he a iable wi h h eshold es ic ion. Simila ly, as be o e, a highe le el o R2 cha ac e izes Va iables (5) ROE (6) Δ ROE (7) ROE (8) Δ ROE SWF_1 ---- SWF_2 ---- SWF_3 0.0450225 (0.724) -0.2910803 (0.010) --0.2500814 (0.007) PERFORMANCE 0.0485792 (0.059) 0.431696 (0.227) -- SIZE -0.1857857 (0.058) -0.0608673 (0.554) -0.2593038 (0.009) - LEVERAGE 0.0638692 (0.000) 0.1023578 (0.000) 0.0598581 (0.000) 0.0994049 (0.000) GROWTH_OPP 0.0006706 (0.898) -0.168623 (0.007) --0.058938 (0.008) _cons 4.72861 (0.017) 1.392562 (0.513) 6.036535 (0.003) -0.0187844 (0.921) R20.4021 0.6309 0.3690 0.6133 Obse a ions 287 280 287 280 Sou ce: own calcula ions No es: This able p esen s es ima es o coe i cien s o he eg ession o ROE and Δ ROE espec i ely. Models (1) and (2) p esen esul s using a dummy a iable o SWF in es men ha equals 1 i he e is equi y in es men , and 0 o he wise; models (3) and (4) using a pe cen age o SWF owne ship, models (5) and (6) using a pe cen age o la ge in es men by he und wi h h eshold es ic ions (o e 1%). Models (7) and (8) p esen es ima ions wi h he use o backwa d- and o wa d-s epwise selec ion. All speci i ca ions use s anda d e o s co ec ed o he e oskedas ici y. In pa en heses a e -s a is ics whe e a P- alue is epo ed. Tab. 2: SWF owne ship and pe o mance o he company (Pa 2) EM_3_2017.indd 183EM_3_2017.indd 183 7.9.2017 10:34:357.9.2017 10:34:35 184 2017, XX, 3 Finance hose eg essions wi h del as as he le -hand a iables. Reg ession models (4), (5), (6) and (8) i a gi en se o da a ela i ely well (R2 close o 99%). Addi ionally, se e al es ima ions (no epo ed in his pape ) we e un using a di e en ma ke indica o o a company’s i nancial pe o mance. In eg essions wi h a ma ke capi aliza ion a iable as well as wi h an en e p ise alue a iable, he a iable SWF_1 had s a is ical signi i cance, howe e he coe i cien s had a nega i e sign. Summing up, he empi ical i ndings o his esea ch along wi h p e ious analysis poin o di i cul ies in measu ing he impac o So e eign Weal h Funds’ owne ship on i nancial pe o mance and he alue o a company, especially wi h he use o accoun ing indica o s. Fu he mo e, he ma ke da a o companies does no p o ide clea e idence on he na u e o such a ela ionship. Thus he impac o SWF owne ship on company pe o mance seems o emain one o an unsol ed puzzle in he i eld o con empo a y i nance. Conclusions The mo i a ion o his s udy was o shed some ligh on o he deba e abou he ela ionship be ween So e eign Weal h Fund owne ship and he i nancial pe o mance o he company. The empi ical i ndings o his esea ch, al hough consis en wi h p e ious ones, does no p o ide clea e idence o he examined ela ion. Howe e he impac o he und on he company lis ed on he eme ging ma ke seems o be simila o he ela ion ha can be obse ed in de eloped ma ke s. Among issues o u u e esea ch is he use o panel da a and he conduc ion o a compa a i e s udy o indus y speci i c issues based on la ge da a Va iables (1) P_BV (2) P_BV (3) P_BV (4) Δ P_BV SWF_1 0.4145615 (0.004) -- 0.1428172 (0.027) SWF_2 -0.0521904 (0.193) -- SWF_3 -- 0.0385772 (0.333) - PERFORMANCE 0.0262617 (0.015) 0.0266111 (0.015) 0.0266961 (0.015) 0.004609 (0.034) SIZE -0.0242915 (0.361) -0.0040284 (0.883) -0.0027371 (0.921) 0.020368 (0.134) LEVERAGE 0.0150607 (0.000) 0.0141023 (0.000) 0.014107 (0.000) -0.108721 (0.000) GROWTH_OPP 0.0014823 (0.209) 0.001585 (0.199) 0.0015922 (0.199) 0.0008265 (0.139) _cons 1.216176 (0.025) 0.851187 (0.124) 0.8297569 (0.135) -0.2030655 (0.459) R20.3641 0.3466 0.3457 0.9894 Obse a ions 289 289 289 289 Sou ce: own calcula ions No es: This able p esen s es ima es o coe i cien s o he eg ession o p ice o book alue a io (P_BV) and Δ P_BV espec i ely. Models (1) and (4) p esen esul s using a dummy a iable o SWF in es men ha equals 1 i he e is equi y in es men , and 0 o he wise, models (2) and (5) using a pe cen age o SWF owne ship, models (3) and (6) using a pe cen age o la ge in es men by he und wi h h eshold es ic ions (o e 1%). Models (7) and (8) p ese es ima ions wi h he use o backwa d- and o wa d-s epwise selec ion. All speci i ca ions use s anda d e o s co ec ed o he e oske- das ici y. In pa en heses a e -s a is ics whe e a P- alue is epo ed. Tab. 3: SWF owne ship and p ice o book alue o he company (Pa 1) EM_3_2017.indd 184EM_3_2017.indd 184 7.9.2017 10:34:357.9.2017 10:34:35