We document that announcement-period abnormal returns of sovereign wealth fund (SWF) equity investments in publicly traded firms are positive but lower than those of comparable private investments. Further, SWF investment targets suffer from declining return on assets and sales growth over the following three years. Our results are robust to controls for target and deal characteristics and are not driven by SWF target selection criteria. Larger discounts are associated with SWFs taking seats on boards of directors and with SWFs under strict government control acquiring greater stakes, supporting the hypothesis that political influence negatively affects firm value and performance.

Co-lending by private-sector and government-owned lenders accounts for over one-tenth of all syndicated-loan funding to corporate borrowers from 1980 to 2010. Co-lending is often rationalized as a mean to impose market discipline on government-owned lenders. We investigate whether that is really the case, or whether political distortions affect “mixed” syndicates including both private and government-owned lenders. We find that mixed syndicates allocate more loans to government-connected firms than private syndicates do. Further, loans from mixed syndicates have lower spreads, longer maturities, less collateral, and fewer covenants. Terms are most favorable when borrowers are “connected.” Firms borrowing from mixed syndicates show a decline in profitability and valuation in subsequent years, suggesting loans are inefficiently allocated. The evidence is consistent with political distortions in mixed lending. Results are driven by domestic government lenders: loan by syndicates including foreign government-owned lenders resemble more closely private-sector loans, both in allocation and loan terms.

We study the impact of government expropriation risk on the terms of cross-border syndicated loans. By comparing loans by foreign lenders from countries covered by Bilateral Investment Treaties (BITs) to loans from non-covered countries, we isolate and quantify the impact of strengthening property rights against government expropriation on loans. We find that stronger property rights lead to a lower cost of debt, larger loans, larger syndicates, less collateral, and fewer covenants. Results are stronger in countries with a history of government expropriations and robust to methodologies accounting for the endogenous nature of BITs and for the simultaneous determination of loan terms. Our findings persist after the inclusion of other metrics of institutional quality, such as legal origin identifiers and an index of creditor rights.

We investigate the aggregate market quality impact of equity shares that fail to deliver (hereafter “FTDs”). For a sample of 1,492 NYSE stocks over a 42-month period from 2005 to 2008, greater FTDs lead to higher liquidity and pricing efficiency, and their impact is similar to our estimate of delivered short sales. Furthermore, during the operative period of a Security and Exchange Commission (SEC) order mandating stock borrowing prior to short sales, the securities affected display relatively lower liquidity and higher pricing errors. Finally, we do not find any evidence that FTDs caused price distortions or the failure of financial firms during the 2008 financial crisis.

We document that announcement-period abnormal returns of sovereign wealth fund (SWF) equity investments in publicly traded firms are positive but lower than those of comparable private investments. Further, SWF investment targets suffer from declining return on assets and sales growth over the following three years. Our results are robust to controls for target and deal characteristics and are not driven by SWF target selection criteria. Larger discounts are associated with SWFs taking seats on boards of directors and with SWFs under strict government control acquiring greater stakes, supporting the hypothesis that political influence negatively affects firm value and performance.

We study the effect of trust on debt contracting. We find that, after the revelation of option backdating, borrowers that likely backdated their previous option grants pay higher interest rates on loans. This adverse effect is mitigated by CEO replacements. Results are similar for public debt, but only if a third party identified the backdaters. After the backdating revelation, firms that engaged in backdating increase their reliance on public debt, and those without access to the public debt market experience capital constraints.

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 investigate whether firm-level political connections affect the allocation of exemptions from tariffs imposed on $US 550 billion of Chinese goods imported to the United States annually beginning in 2018. Evidence points to politicians not only rewarding supporters but also punishing opponents: Past campaign contributions to the party controlling (in opposition to) the executive branch increase (decrease) approval likelihood. Our findings point to quid pro quo arrangements between politicians and firms, as opposed to the “information” channel linking political access to regulatory outcomes.