Outside Publication

Leveraging International Law to Incentivize Value-Added Shareholding

Why Foreign Sovereign Wealth Funds Still Matter and How They Can Improve Shareholder Governance

2015 | 46 Geo. J. Int'l L. 947

Rhetoric surrounding foreign sovereign wealth funds (SWFs) has reflected a swinging pendulum: from a fear of SWFs actively investing based on political motivations, to a fear of SWFs passively sinking into institutional apathy. This Note examines empirical information about SWF investment behavior in the post-financial crisis world and proposes a solution to yield a value-enhancing middle ground. This Note argues that when SWFs behave like responsibly active shareholders, their behavior is value-maximizing for the firm in which they invest. However, in order to ensure that SWF shareholders remain responsibly active, SWFs must be more transparent. Such transparency can be achieved by harnessing international law mechanisms to incentivize transparent SWF investment.

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