Determinants of Sovereign Wealth Fund Cross‐Border Investments

34 Pages Posted: 11 Oct 2013

See all articles by William L. Megginson

William L. Megginson

University of Oklahoma

Miao You

Party School of the Central Committee of the CPC

Liyan Han

Beihang University (BUAA) - School of Economic and Management Science

Date Written: November 2013

Abstract

Using a sample of 1,590 purchases of stock by sovereign wealth funds (SWFs) in listed firms in 78 target countries between 1985 and 2011, we study the country‐level determinants of SWF cross‐border investment. We find that SWFs from countries with high levels of openness and economic development, but with less developed local capital markets, will make more cross‐country transactions, while target countries with higher levels of investor protection and more developed capital markets will attract more SWF investment. Our findings support the investment facilitation hypothesis, suggesting that SWFs act purely or principally as commercial investors facilitating cross‐border corporate investment.

Keywords: sovereign wealth funds, cross‐border investment, investment facilitation hypothesis, political influence hypothesis

JEL Classification: G15, G32, G38

Suggested Citation

Megginson, William L. and You, Miao and Han, Liyan, Determinants of Sovereign Wealth Fund Cross‐Border Investments (November 2013). Financial Review, Vol. 48, Issue 4, pp. 539-572, 2013. Available at SSRN: https://ssrn.com/abstract=2338849 or http://dx.doi.org/10.1111/fire.12015

William L. Megginson (Contact Author)

University of Oklahoma ( email )

307 W Brooks, 205A Adams Hall
Norman, OK 73019
United States
(405) 325-2058 (Phone)
(405) 325-1957 (Fax)

HOME PAGE: http://faculty-staff.ou.edu/M/William.L.Megginson-

Miao You

Party School of the Central Committee of the CPC

China

Liyan Han

Beihang University (BUAA) - School of Economic and Management Science ( email )

37 Xue Yuan Road
Beijing 100083
China

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