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How do sovereign wealth funds pay their portfolio companies’ executives? Evidence from Kuwait

Alhashel, Bader and Albader, Sulaiman H. (2018) How do sovereign wealth funds pay their portfolio companies’ executives? Evidence from Kuwait. LSE Middle East Centre papers series, 24. LSE Middle East Centre, London, UK.

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Abstract

Sovereign wealth funds (SWFs) are major players in the global markets. This paper examines the possible value SWFs bring to their domestic holdings by examining the impact of SWF ownership on firms’ executive compensation. Using data on Kuwaiti SWFs, we find that having an SWF as an ultimate owner enhances the pay–performance sensitivity (PPS) to levels matching those in more developed markets. This pay–performance enhancement increases as the rights of the SWF to manage and oversee the firm’s cash-flow increase. Moreover, having an SWF as the firm’s ultimate owner alleviates the adverse effects of the divergence in cash-flow and control rights. This evidence supports the notion that SWFs create value for their target investments through activism, monitoring and corporate governance enhancements.

Item Type: Monograph (Other)
Official URL: http://www.lse.ac.uk/middle-east-centre/publicatio...
Additional Information: © 2018 the Author(s)
Divisions: Middle East Centre
Subjects: H Social Sciences > HG Finance
Sets: Research centres and groups > Middle East Centre
Collections > Middle East Centre Paper Series
Collections > Kuwait Programme
Series: Working Papers > Middle East Centre Paper Series
Date Deposited: 22 Jun 2018 14:41
Last Modified: 22 Jun 2018 14:41
URI: http://eprints.lse.ac.uk/id/eprint/88578

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