Financial Reporting Consequences of Sovereign Wealth Fund Investment

• 成果类型: Article
• 署名作者: Godsell, David
• 署名单位: University of Illinois System; University of Illinois Urbana-Champaign
• 刊物名称: CONTEMPORARY ACCOUNTING RESEARCH
• ISSN/ISSBN: 0823-9150
• DOI: 10.1111/1911-3846.12776
• 发表日期: 2022
• 页码: 2090-2129
• 关键词: earnings management; corporate governance; institutional investors; real activities; SHAREHOLDER ACTIVISM; PRIVATE EQUITY; BONUS SCHEMES; INFORMATION; disclosure; OWNERSHIP

摘要

Sovereign wealth funds (SWFs) are government-owned institutional investors pursuing political and financial investment objectives. With $8 trillion in assets, SWFs are geopolitical powerbrokers actively participating in global capital markets, yet we know little about the financial reporting consequences of SWF investment. I document evidence supporting the hypothesis that the simultaneous pursuit of political and financial investment objectives renders SWFs weak monitors. Using a staggered difference-in-differences research design, I document economically significant increases in discretionary accruals for SWF target firms after SWF investment, relative to an entropy-balanced control group of non-SWF target firms. Corroborating tests document that the effect of SWF investment on discretionary accruals strengthens with SWFs' equity stake and SWF target firms' earnings management incentives and weakens when regulators curb SWFs' pursuit of political objectives. I highlight SWFs' distinct monitoring effect by replicating my analyses after replacing SWF investment with conventional institutional investment, and document that conventional institutional investment instead reduces discretionary accruals. I further corroborate SWFs' distinct monitoring role among conventional institutional investors using a wide variety of robustness tests employing alternate specifications, samples, and financial reporting proxies. Overall, this study introduces an economically important and fundamentally distinct but little-studied institutional investor to the accounting literature.