The color of government money: Do investors differently value the investment of sovereign wealth funds?
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Urban, Dariusz Article The color of government money: Do investors differently value the investment of sovereign wealth funds? e-Finanse: Financial Internet Quarterly Provided in Cooperation with: University of Information Technology and Management, Rzeszów Suggested Citation: Urban, Dariusz (2017) : The color of government money: Do investors differently value the investment of sovereign wealth funds?, e-Finanse: Financial Internet Quarterly, ISSN 1734-039X, De Gruyter Open, Berlin, Vol. 13, Iss. 1, pp. 25-34, https://doi.org/10.1515/fiqf-2016-0016 This Version is available at: https://hdl.handle.net/10419/197371 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may be saved and copied for your personal and scholarly purposes. You are not to copy documents for public or commercial purposes, to exhibit the documents publicly, to make them publicly available on the internet, or to distribute or otherwise use the documents in public. If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. https://creativecommons.org/licenses/by-nc-nd/3.0
www.e-finanse.com University of Information Technology and Management in Rzeszów 25 Dariusz Urban1 Abstract Thearticleaimsatpointingoutthedifferencesinmarketreactionsregardingtheannouncement ofaninvestmentofselectedSovereignWealthFundsincompanieslistedontheLondonStock Exchange.Theresearchsampleconsistsof796markettransactionsmadebyfourselectedSovereignWealthFunds.Theauthoremployedeventstudymethodologytocalculatetheaverageabnormalreturnsandcumulativeabnormalreturnsforeachfundinsubsamples.Theempiricalfindings suggestthatinvestorsreactdifferentlytotheinformationaboutafund’sinvestment.Tothebest oftheauthor’sknowledge,theliteraturedoesnotprovideanyanswerastohowthemarketreacts toinformationdisclosureofindividualfunds.Therefore,thispaperbridgesthegapintheliterature withinthisfield. 1 DepartmentofFinanceandStrategicManagement,UniversityofŁódź,FacultyofManagement,[email protected]. THE COLOR OF GOVERNMENT MONEY. DO INVESTORS DIFFERENTLY VALUE THE INVESTMENT OF SOVEREIGN WEALTH FUNDS? Financial Internet Quarterly „e-Finanse” 2017, vol.13/ nr 1, s. 25-34 DOI: 10.1515/fi qf-2016-0016 JEL classification: F21, G14, G23 Keywords: sovereign wealth funds, event study, London Stock Exchange, investment Received:19.03.2016 Accepted:30.03.2017
www.e-finanse.com University of Information Technology and Management in Rzeszów 26 „e-Finanse” 2017, vol. 13 / nr 1 Dariusz Urban The color of government money. Do investors differently value the investment of sovereign wealth funds? Introduction Sovereign Wealth Funds (SWFs) are investment vehiclesestablishedinordertomanageinarationaland profit oriented way pools of national wealth for future generations.Nowadaysover70ofthemwithover7,000 billionUSDofassetsundermanagementexistandoperate onglobalfinancialmarkets.Severalofthemwerecreated decadesago,however,thenumberofthosewhosehistory startsatthebeginningofthe21stcenturyrepresentsthe majorityofthetotalexisting.SWFsareamongthemost important institutional investors all around the world andconstituteasolidelementinthearchitectureofthe international financial safety net. What distinguishes them the most from other financial institutions is the factthattheyare100%owned,managedandcontrolled by sovereign states. These state-run funds have limited liquidity needs, a lower than market average level of redemption risk, focus on the long term (measured in decades)investmenthorizonandhavearelativelyhighrisk tolerance.SWFsaresimultaneouslyinnovativeinvestment toolsofthemanagingcountry’sforeignexchangereserves aswellashybridinnatureinvestmentvehiclescombining theprivatesector’smethodsofinvestmentwithpublicsectorgoals,determinedbygovernments. Given the increasing capital involvement of SWFs within a wide range of asset classes globally, a further understandingofthebroaderaspectsoftheirinvestment activityseemstobeneeded,includingtheconsequences of asset allocation in capital markets as well as in individual listed companies. In recent years several articles have been dedicated to analysis of the impact of SWF investments on the financial performance of theentitiestheyinvestinandmarketreactionstothese events. The empirical findings of this research do not provideaclearpictureoftheissue.Oneofthequestions thathasnotbeenraisedyetisthereactionofinvestors to the announcement regarding information about the acquisitionofsharesoflistedcompaniesbyanindividual state-runfund.Thisquestionisjustifiedbythefactthat a group of SWFsconsistsof relatively different entities, different in terms of the political system in country of origin,transparencyandsizeoffunds,theirmaingoalsof creationandinvestmentstrategies.Thus,itisreasonable toassumethatinvestorsandmarketsmightbereacting differentlytotheinformation.Themaingoalofthispaper istoanalyzewhethershort-termmarketreactionstothe disclosureofinformationabouttheinvestmentsdiffersor issimilarwithinaselectedsampleofSWFs. ThisarticlebuildsonthepreviouspapersofFotak, BortolottiandMegginson(2008),KotterandLel(2008), Dewenter, Han and Malatesta (2010) and Dinh (2011), Bortolottietal.(2015)whoarealsointerestedinanalyzing whetherornotSWFinvestmentshaveanimpactonstock returnintheshortrun.However,thisarticle’sapproach differsinthatitfocusesonexaminingmarketreactionto theinvestmentofeachindividualfundonjustonemarket –theLondonStockExchange-ratherthanthegroupof fundsandtheirinvestmentactivitiesondifferentmarkets allaroundtheworld.Thispapercontributesthreefoldto ongoingresearchinthefieldofstudiesrelatedtofinancial aspectsofSWFbehavior.First,itusesalargesampleof totaltransactioneventsaswellasanumberofdealsfor eachselectedfund.Second,thisresearchisbasedona relativelyshorttime-spantoavoidthechangesininvestor preferences, which can lead to potential biases. Third, thisistotheauthor’sknowledgethefirststudyproviding empiricalevidenceon differencesinmarketreactionto theinvestmentsofanindividualSWF. Theremainderofthepaperisorganizedasfollows. Section 2 discusses the literature and formulates the hypothesis.Section3describesthedataandmethodology. Section4reportsanddiscussestheempiricalfindingsof theresearch.Conclusionsprovideabriefsummaryofthe research. Background and hypothesis Since the similarity or diversity of market reaction totheannouncementofinvestmentsmadebyindividual SWFshaveyet tobeaddressed,welook totherelated literature that provides analog predictions, from which we can draw conclusions. Specifically, we look to the literature on government ownership in companies and oninstitutionalinvestmentsforinsightastohowfeatures of selected funds might affect the short-term financial performanceoftargetcompanies. AsSWFsareunderthefullcontrolofgovernments, their target firms are at least partially governmentowned as well (Knill, Lee & Mauck 2012). This strand of literature suggests that governments usually have a negative impact on firm financial performance, which improveswithprivatization(Estrin,Hanousek,Kočenda&
Dariusz Urban The color of government money. Do investors differently value the investment of sovereign wealth funds? www.e-finanse.com University of Information Technology and Management in Rzeszów 27 „e-Finanse” 2017, vol. 13 / nr 1 Svejnar,2009;Sun&Tong2003).Becauseoftheirpolitical connections,SWFsarelikelytohaveobjectivesotherthan obtaining the highest possible financial return. Hence, targetfirmsmightberelativelyinefficientandexperience reductionsintheirmarketvalue(Fernandes,2014).Inthe caseofpublic-private ownership, someauthorssuggest that such mixed ownership also has a negative impact onthevalueofthecompany(Borisova,Brockam,Sales, Zagorchev, 2012). In consequence, investors can react negatively to the information that the fund acquired stocksofacompany,therebydiscountingpotentialfuture disadvantagesofsuchashareholderstructure.However, ontheotherhand,itislikelythatSWFs,duetotheirability toopendoorstonewmarketsandbyhelpingcompanies markettheirproductsintheirhomemarkets,willincrease thefinancialperformanceandvalueofthefirm.Aslongterm investors, SWFs can significantly relax financing constraints of companies, thereby allowing them to undertake promising investments with more distant payoffs(Fernandes,2014).Thus,inthiscasethepossible outcomeoftheinformationaboutSWFinvestmentmight beapositivemarketreaction.Somefundsaremanifesting theirpolitically-biasedbehavior(Kamiński,Obroniecki& Wiśniewski,2015),whichmayputthetargetcompanies atadisadvantagetoothercompanieswithpurelymarketdrivenowners.Ontheotherhand,mostacquisitionsof SWFshavebeenmadeonforeignmarkets,whereastate purchaserhasalimitedabilitytoexerciseanysovereign regulatory or supervisory power and to monitor target firmmanagersasprivateinvestorsdo,especiallyifthey arepoliticallyconstrained(Bortolotti,Fotak&Megginson, 2014). Different political systems in the origin country of a SWF can also have an influence on the extent to which using its ownership rights in target companies, governments will try to achieve economic, financial as well as social and political goals of the state. Another factorpossiblydeterminingtheinvestmentactivityofthe fundistheeconomicandpoliticalrelationshipbetween countries and also standards of corporate governance withinlistedcompanies,inparticularthecapitalmarket. Inlightofthat,itseemstobereasonabletoassumethat investors will differently value the investment of SWFs comingfromdifferentcountriesandadditionallyitislikely thattheinvestmentofasinglefundindifferentmarkets canhaveadifferentinfluenceonthestockperformance ofthecompany. As regards to the second factor mentioned above, itisworthnotingthatSWFinvestmentactivitiesreflecta broaderphenomenonofequityownershipconcentrated withinagroupofinstitutionalinvestorsratherthaninthe handsofanindividual.Nowadays,institutionalinvestors holdaround60%ofallpubliclylistedstockintheUnited States,around72%inJapanandaround89%intheUnited Kingdom (UK) (Çelik & Isaksson, 2014). The prediction thatinvestorspositivelyreacttotheinvestmentofSWFs arisesfromtheassumptionthatlargeinstitutionalowners haveanincentivetoandcanefficientlymonitorinsiders, reducing the likelihood that will make suboptimal decisions(Navissi&Naiker2006).Anumberofresearch studies provides empirical evidence that institutional investors have a positive effect on firm performance (Hsu&Wang,2014; Elyasiani& Jia,2010,Yuan,Ziao & Zou, 2008). However, on the other hand, the literature providesevidenceonthenegativerelationshipbetween institutional ownership and company performance (Liang, Lin & Huang, 2011; Charfeddine & Elmarzougui, 2010; Ruiz-Mallorquí & Santana-Martín, 2011). Thus, it seems likely that investor reaction to the disclosure of informationthatanSWFinvestedinacompanywillbein theoppositedirection. Another factor possibly affecting market reaction to the announcement might be the level of a fund’s engagementin monitoringthe managementofatarget firm using its ownership rights. In this context SWFs differasagroup–someofthefundsarepassiveinvestors while others behave like active owners, monitoring the managers and participating in the decision-making process. Although the current literature on SWFs does not provide evidence on the relationship between the financialperformanceofatargetcompanyandthecapital involvementofapassiveoractiveinvestor,itisreasonable topresumethatinvestorsmightbevaluingdifferentlythe investmentfromeachgroup. Since 1970 and the work of Akerloff, who brought theinformationissuetotheforefrontofeconomictheory (Salehi, Rostami & Sehali, 2012), information and the access to it has widely been considered an important element in a large number of studies in the field of finance and economics. Access to different information is a common explanation of why investors trade assets on stock markets (Barlevy & Velonesi, 2000). Given the fact that it is typically assumed that the information is costlytoacquire,transparencyoftheinvestormightbe
www.e-finanse.com University of Information Technology and Management in Rzeszów 28 „e-Finanse” 2017, vol. 13 / nr 1 Dariusz Urban The color of government money. Do investors differently value the investment of sovereign wealth funds? affecting the market reaction to the investment. SWFs vary considerably in terms of transparency, measured by the Linaburg-Maduell Transparency Index (SWFI, 2016). Lack of information about investment strategies, asset allocation, financial performance of the fund or thedifferenceininformationdisclosuresbetweenSWFs mightbethefactordeterminingdiversemarketreactions totheinformationaboutaninvestment. Andlastbutnotleast,itislikelytoassumethatthe sizeofthefundcandetermineshort-termmarketreaction tothedisclosureofinformationaboutaninvestmentin the target company. Large firms can exploit economies of scale, employ more skilled managers and formalize theprocedures(Kumar,2004),thusalargeSWFseemsto havebetterpotentialtomonitorthecompaniesintheir portfolio.Moreover,withrelativelylowerliquidityneeds coming from the domestic economy, large SWFs can provide relatively more stable long-term capital to the target firms. As a consequence of the abovementioned factors,itprovidessoundgroundstobelievethatinvestors mightbedifferentlyreactingtotheinvestmentof large andsmallSWFs. Based on the arguments presented above the conclusioncanbedrawnthatseveralfactorsdetermining thepotentialreactionofinvestorstotheannouncement ofinformationabouttheinvestmentarecountry-specific, market-specific and fund-specific. Meanwhile, previous studiesonthisissueassumedatleasttosomeextenta homogeneousreactionwithinthegroupofSWFsandon differentcapitalmarkets.Moreover,theempiricalresults foundintheliteraturearecontroversialwithreferenceto theshortversuslongterm,aswellastoinvestmentand divestmentissueswhicharerelativelysparse,mainlydue todifficultiesinobtainingcomprehensiveandsystematic data(Heaney,Li&Valencia,2011)aswellasinformation gaps(Ciarlone&Micelli,2014).Inthecaseofshort-term marketreactiontotheSWFinvestments,agreatnumber ofstudiesarerelativelyconsistent. Dinh(2011),usingthesampleof60SWFinvestments in companies listed on six capital markets and with a researchtimespanof2003-2009,presentedresultsthat indicatethatSWFinvestmentsgeneratesubstantialand positivecumulativeaverageabnormalreturnsduringthe twotradingdaysbeforeandaftertheannouncementof theinvestment.Theaveragefive-daycumulativeabnormal returnswere1.69%fora(-2,+2)windowand1.23%fora (-1,+1)window.TheempiricalfindingsofDewenter,Han and Malatesta (2010), based on the research sample consistingof227SWFtransactionsbetween1987-2008, suggestthatSWFinvestmentsareassociatedwithpositive abnormalstockreturnsforthetargetfirms.Theaverage three-day cumulative abnormal returns were 1.5% with a statistical significance at the 1% level. Kotter and Lel, analyzingthestockpriceimpactof163announcements ofSWFtransactionsbetween1982-2008in28countries, show that the market reacts positively to an event involvingSWFs.Theaveragecumulativeabnormalreturns were 1.9%, 2.15% and 2.43% for the time windows of (0,+1), (-1,+1) and (-2,+2), respectively. Similarly, Fotak, BortolottiandMegginson(2008)using asampleof 212 SWFacquisitionshavedocumentedasignificantlypositive 0.8%meanabnormalreturnaroundtheannouncement date. In line with the previous evidence, the empirical results of Mietzner, Schiereck and Schweizer (2015) suggestsubstantialpositivestockreturnsinresponseto theannouncementofSWFinvestments.Forthesample of 147 transactions the cumulative average abnormal returnsfortargetedcompanieswere2.71%and3.4%in (-1,+1)and(-5,+5)eventwindows,respectively. Summingup,previousstudiesaddressingtheissue ofshort-termperformanceofcompaniesinwhichSWFs hadinvestedhavemainlyfocusedontheoverallimpact ofSWFinvestmentsonthefinancialperformanceoflisted companies, analyzing the overall portfolio of different funds, consisting of different markets. However, the potential reaction of investors to the announcement of informationaboutaninvestmentandthereforetheimpact of the investment on a stock’s rate of return might be differentforeachfund.Suchreasoningisjustifiedbythe factthatSWFsdifferintermoftransparency,size,goals ofinvestmentsandstrategiesemployedtoachievethese goalsaswellaspoliticalsystemsintheorigincountryof thefund(Shunmugam,2012;Urban,2009).Eachofthese factorsalone,andallofthemtogether,candeterminethe investmentbehaviorofthefund.Moreover,theinvestors from different markets might be diversely valuing the investmentbehaviorofindividualfundsinpolitical,culture and historical contexts. In consequence, the market reactiontotheinvestmentmightbedifferentinresponse to a combination of factors underlying the investment decisions. Thus, the aggregation of data for the group of funds from different capital markets can affect the researchresultsandleadtomisleadingconclusions.There is a lack of empirical evidence as to whether investors react similarly or differently to the investment of each
Dariusz Urban The color of government money. Do investors differently value the investment of sovereign wealth funds? www.e-finanse.com University of Information Technology and Management in Rzeszów 29 „e-Finanse” 2017, vol. 13 / nr 1 SWF, andthe impact ofinvestmentsforthe shortterm financialperformanceoflistedcompaniesinthiscontext remainunknown. Wesummarizetheabovereasoninginthefollowing hypothesis: Investors differently value the investments of selectedSWFs. Methodology Information on SWF transactions in the UK was obtained from the Sovereign Wealth Fund Institute database.Werestrictedtheinitialsampletotransactions madeincompanieslistedontheLondonStockExchange in 2013. This particular stock exchange was chosen primarily because of its size, liquidity and maturity and secondlybecauseitofferedalargenumberoftransactions madebyvariousfundstocompare.Sucharelativelyshort time-spanoftheresearch,comparedtopreviousstudies, helpedtoavoidpossiblebiasescomingfromchangesin investorpreferences,whichcanhaveaninfluenceonthe findings.Wecleanedthedatabaseoferrorscomingmainly fromincludingtransactionsfromothermarkets.Then,in ordertobalancethenumberofeventsinthesubsamples of the compared funds, we restricted the database to fundswith50ormoretransactions.Giventhefactthat SWFshavepreferencesovertheliquidstockofcompanies listedontheLondonStockExchange(Urban2016),there wasnoneedtoexclude companiesfromthesample to avoidpotentialbiasesfromilliquidstocks. In the next step, we obtained daily stock prices of sharesaswellasvaluesoftheindex(FTSE-AllShare)from Thomson Reuters Eikon. Matching both databases, we excludedtransactionsofdelistedandacquiredorrenamed companies.Thefinalsampleusedinthisstudyconsistsof 796transactionsmadebyfourSWFsincompanieslisted ontheLondonStockExchange,whichisover80%ofthe totalnumberofSWFinvestmentsonthismarketin2013. Table1presentsthekeycharacteristicsofSWFsanalyzed inourstudy. Toanalyzethemarketreactiontotheannouncement ofinvestmentsweusedeventstudymethodology.Since the work of Fama, Fisher, Jensen and Roll (1969), this methodologyiscommonlyusedinthefieldoffinance(see e.g.Bank&Baumann,2015foraliteraturereview).Event study methodology derives from the efficient market hypothesis (Fama, 1970), which holds that stock prices reflect all available information about listed companies andalsothatinformationarrivalthroughmarketsurprises areinstantlyincorporatedinthe pricesofshares.Thus, ifthemarketisefficient,stockpriceswillrespondtothe information that investors believe is important to the company.Assumingthatchangesinshareholderstructure is such information, with other things being equal, there are grounds to expect that price changes occur immediately around the announcement, or on the first dayoftrading.However,alargenumberofeventstudies challenge this assumption by showing that the stock marketover-andunderreactstonewinformation(Bond &Thaler,1985;Baytas&Cakici,1999;Nam,Pyun&Avard, 2001). To deal with potential delays in market reaction theauthorsalsocalculatedrelativepricechangeswithina longereventwindow.Pricereactions–averageabnormal Table 1: Characteristics of funds Name of the fund Country of origin Transparency* Size** Number of transactions AbuDhabiInvestmentAuthority(ADIA) UnitedArabEmirates 6 773 242 GovernmentofSingaporeInvestmentCorporation(GIC) Singapore 6 344 227 KuwaitInvestmentAuthority (KIA) Kuwait 6 592 122 GovernmentPensionFund Global(GPFG) Norway 10 824,9 205 SNote:*- in the Linaburg-Maduell Transparency Index, scores from 1 to 10, where 10 is the highest transparency; **- in billions of USD of assets under management, at the end of 2015 Source: Own elaboration based on Sovereign Wealth Fund Institute
www.e-finanse.com University of Information Technology and Management in Rzeszów 30 „e-Finanse” 2017, vol. 13 / nr 1 Dariusz Urban The color of government money. Do investors differently value the investment of sovereign wealth funds? returns (AARs)or cumulative abnormalreturns(CAARs) are measured relatively to the reaction of the market in that particular time. Positive AARs or CAARs suggest thatinvestorsvaluetheinvestmentofSWFsasbringing potentialvalueaddedtothecompanyinthefuture,while negativeAARsandCAARsmightbesuggestingthatinthe opinion of investors SWF ownership will be harmful to the company. Differences between market reactions in responsewithinthegroupoffundsmightbetheevidence that investors differ in valuing the impact of particular fundsonthefutureofacompany’sperspectives. In this study, we calculate abnormal returns as the difference between a company’s returns that are observable at the stock market and return from the indexcoveringallsharesofcompaniesthatarelistedat that particular time on the stock exchange (Fiszeder & Mstowska,2011): (1) where: -Abnormalreturnofi-companyintimet, -Observedreturnofi-companyintimet, -Observedreturnofindex(ind)intimet. The author used stock returns in logarithms and calculatedabnormalreturnsforthetimewindowcovering theperiodfrom10daysbeforetheannouncementto10 days after the announcement of information about an investment. In the next step, the author calculated the AARsforcompaniesintheportfolioofeachfund.Then thedailyAARswereaggregatedacrossthedifferentevent periods to obtain CAARs for each fund. Unlike previous studies, AARs and CAARs between funds were tested usingtheKruskal-Wallistesttocapturethesignificanceof potentialdifferencesinmarketreactionstothedisclosure ofinformationaboutinvestmentsofeachindividualfund. Thedifference insubsamples were alsoanalyzedbased onthetransparencylevelofthefund (fullytransparent versus transparent) and the origin of the fund’s money (commodity versus non-commodity) using the Mann- Whitney-Wilcoxontest.Statisticalcalculationsweredone usingSPSS. Empirical results ResultspresentedinTable2supporttheviewthat investors differently value the investment of selected SWFs. In t+1 to the event day with p value equals 1% thereisstatisticaldifferenceinthedistributionsofstock abnormalreturnsoftargetcompaniesbetweenthefour analyzedfunds.Moreover,thisdifferenceremainsforthe nextthreedays(t+2,t+3,t+4),althoughlessstatistically significant(pvalueequals5%andpvalueequals10%). However, looking at the sign of calculated measures in eachcasewecannotdrawacoherentconclusionabout thedirectionsofthemarketreactiontotheinformation in the following days. Only on the event day is there a positivesignofAARswithinthewholesample,withno statisticallysignificantdifferencebetweenthefunds. Given the calculated CAARs, the empirical results provide a rather clear picture on the issue of market reactiontothedisclosureofinformationaboutthefund’s investments(Table3).Inthreeoutofthefourfundsthe CAARs around the investment event were positive for three estimation windows, with statistically significant differences between funds in two of them (-1,+1) and (0,+1). These findings suggest that the market reacts positively to information that an investment in a listed company on the London Stock Exchange was made byADIA,KIAandGPFG.Thestrengthofthereactionin (-1,+1) and (0,+1) estimation windows, measured by CAARs,suggestthatinvestorsvaluethecapitalallocation ofADIAthemost.InthecaseofGIC,CAARswithinthree estimation windows were negative, suggesting that investorsfindtheinvestmentofthisfundtobeharmfulto thecompany,ceteris paribus. TheempiricalfindingspresentedinTable4suggest thattheoriginofthemoneyusedtocreateSWFsseems to be the factor determining different reactions to the investment.Inthreedaysfollowingtheevent,thereare statistically significant differences between two groups, thoseconsistingof commodityfunds (ADIA, KIA, GPFG) and those of non-commodity funds – GIC. However, theseresultsdonotallowustodrawaclearconclusion aboutthedirectionofthepotentialrelationshipbetween commodityversusnon-commodityfundsandtheinvestor reactiontotheinvestmentandfurtherstudyisneededin ordertoanswerthisquestion.Asregardstransparency, similar conclusions can be drawn. Although there are statistically significant differences between two groups, onewithGPFGandthesecondwithADIA,GICandKIA, theobtainedresultsdonotallowustoconcludethata highertransparencyofthefundfostersapositivemarket reactiontotheinvestmentorthatalowertransparency correlateswithaweakerinvestorreactiontoinformation
Dariusz Urban The color of government money. Do investors differently value the investment of sovereign wealth funds? www.e-finanse.com University of Information Technology and Management in Rzeszów 31 „e-Finanse” 2017, vol. 13 / nr 1 Table 2: Average abnormal returns (%) Day ADIA GIC KIA GPFG Kruskal- -Wallis No. of obs. -10 -0,0367 0,0267 -0,0366 -0,1316 2,231 796 -9 -0,0493 0,0481 0,1148 -0,1959 6.560* 796 -8 -0,0023 0,4074 -0,0661 0,0728 8.862** 796 -7 -0,0246 -0,1023 -0,1474 -0,3756 7.230* 796 -6 -0,1345 -0,5305 0,0161 -0,0321 9.844** 796 -5 -0,0373 0,0665 0,0289 -0,2678 9.340** 796 -4 0,0532 0,1352 -0,2379 -0,0287 4,514 796 -3 -0,2657 -0,2466 -0,0094 -0,1637 3,751 796 -2 -0,0053 0,0684 0,1169 0,0555 2,32 796 -0,0077 -0,0505 0,0182 -0,0236 3,022 796 0 0,0468 0,2432 0,1234 0,0723 3,521 796 10,1552 -0,5499 -0,1122 0,044 28.703*** 796 2 -0,1126 0,0411 0,0049 -0,0036 6.427* 796 3 -0,0057 0,3617 -0,1441 -0,0611 9.490** 796 4 0,0552 0,177 0,0537 -0,328 7.484* 796 5 0,0719 0,1699 0,1065 0,0236 2,457 796 6 0,0357 -0,1065 0,077 -0,0863 2,203 796 7 -0,0463 0,5446 0,0713 0,0132 14.961*** 796 8 0,0106 0,2788 -0,1163 0,1422 7.169* 796 9 -0,1149 0,1633 -0,1728 0,1139 7.331* 796 10 -0,1176 0,5222 0,0258 -0,0795 30.091*** 796 Note: ***, ** and * indicate a statistical significance at the 1%, 5% and 10% levels, respectively. Source: Own elaboration Table 3: Cumulative average abnormal returns (%) Estimation window ADIA GIC KIA GPFG Kruskal- -Wallis No. of obs. (-1,+1) 0,1942 -0,357 0,0294 0,0927 6.747* 796 (0,+1) 0,202 -0,307 0,0112 0,1163 7.244* 796 (0,+2) 0,0893 -0,266 0,0161 0,1127 0,708 796 (0,+3) 0,0836 0,0961 -0,128 0,0516 1,506 796 (0,+4) 0,1388 0,2731 -0,074 -0,276 1,092 796 (0,+5) 0,2107 0,443 0,0323 -0,253 0,329 796 Note: *, indicate a statistical significance at the 10%, levels. Source: Own elaboration
www.e-finanse.com University of Information Technology and Management in Rzeszów 32 „e-Finanse” 2017, vol. 13 / nr 1 Dariusz Urban The color of government money. Do investors differently value the investment of sovereign wealth funds? announcingthataninvestmentwasmadeincompanies listed on the London Stock Exchange. Summing up, empiricalfindingsofthisresearchsupportthehypothesis thatassumesinvestorsdifferentlyvaluetheinvestments ofselectedSWFsHowever,thequestionaboutthefactors determiningthereactionareyettobeanswered.Further studies in this field might be aided by using regression to analyze whether a fund’s characteristics such as transparencyorsizehaveinfluenceonabnormalreturns followinganinvestmentinlistedcompanies.Comparing reactionsbetweenmarketsseemstobeanotherpromising avenueforfurtherresearch.Andfinally, theambiguous findingsofthisresearchmighthavebeenobtaineddue tothefactthatshort-termstockperformancecorrelates withthesizeoftheinvestment,thusfuturestudiesshould controlforthisvariable. Conclusions With over 7,000 billion USD assets under managementandglobalinvestmentactivity,SWFsprove to be important institutional investors with possible implicationsforstockmarketsandtargetcompanies.The question that arises is whether or not such a status of globalinvestorswillbeunderminedbyfallingpricesofoil andgas,whichfueledtheexpansionofalargenumbersof SWFs.Nowadays,over50countrieshavebeenusingthese investmentvehiclestoachieveeconomic,financialaswell as social and political goals. This article addresses the issueofmarketreactioninresponsetotheinformation aboutSWFinvestmentincompanieslistedonthestock exchange.Theempiricalfindingsobtainedwiththeusage of event study methodology point to the differences in investors’reactionstoinformationabouttheinvestment madeontheLondonStockExchangewithinthegroupof fourselectedSWFs.Althoughtothebestoftheauthor’s knowledge this study attempts to fill the gap in the literatureonSWFs,furtherstudiesareneededtoprovide comprehensiveandcoherentevidenceinthisfield. Table 4: Average abnormal returns in subsamples (%) Day Commodity (ADIA, KIA, GPFG) Noncommodity (GIC) Mann-Whit- ney-Wilcoxon test Full transparent (GPFG) Transparent (ADIA, GIC, KIA) Mann-Whit- ney-Wilcoxon test 0 0,0724 0,2432 -1,477 0,0723 0,138 -1,574 10,0578 -0,55 -5.053*** 0,044 -0,0171 -1.917* 2 -0,048 0,0411 -2.000** -0,0036 -0,029 -0,77 3 -0,055 0,3617 -2.947*** -0,0611 0,1068 -1,148 4 -0,083 0,177 -1,118 -0,328 0,1017 -2.701*** Note: ***, ** and * indicate a statistical significance at the 1%, 5% and 10% levels, respectively. Source: Own elaboration