I examine shareholder wealth effects associated with different types of government investors in an international sample. I develop a taxonomy to identify government political, financial, and industrial arms. State investments, similar in dollar amount to state privatizations, have increased target shareholder wealth by over USD 50 billion. But market participants differentiate among government entities as target shareholders lose over USD 14 billion, when the investment is announced by the political arms of government rather than the industrial or the financial arms. The apparent intent of government agency is considered by private investors. Post-investment performance tests, institutional environment analysis, and access to credit tests corroborate this.

We investigate how government equity ownership in publicly traded firms affects the cost of corporate debt. Using a sample of bond credit spreads from 43 countries over 1991–2010, we find that government ownership is generally associated with a higher cost of debt, consistent with state-induced investment distortions, but is associated with a lower cost of debt during financial crises and for firms more likely to be distressed, when implicit government guarantees become the dominant effect. Our results are robust to controls for the endogeneity of government ownership, and we find these effects to be specific to domestic government ownership.

We study the dynamics of cash-and-carry arbitrage using the U.S. crude oil market. Sizable arbitrage-related inventory movements occur at the New York Mercantile Exchange (NYMEX) futures contract delivery point but not at other storage locations, where instead, operational factors explain most inventory changes. We add to the theory-of-storage literature by introducing two new features. First, due to arbitrageurs contracting ahead, inventories respond to not only contemporaneous but also lagged futures spreads. Second, storage-capacity limits can impede cash-and-carry arbitrage, leading to the persistence of unexploited arbitrage opportunities. Our findings suggest that arbitrage-induced inventory movements are, on average, price stabilizing.