The Political and Governance Risks of Sovereign Wealth

ANNALS OF CORPORATE GOVERNANCE Vol. 4 No. 3 PP. 147—271 (2019)

82 Pages Posted: 17 Jul 2019 Last revised: 5 Apr 2021

See all articles by Paul Rose

Paul Rose

Ohio State University - Moritz College of Law; Bocconi University - BAFFI Center on International Markets, Money, and Regulation; Tufts University - The Fletcher School of Law and Diplomacy; Fundación Instituto de Empresa, S.L. - IE Business School

Date Written: July 17, 2019

Abstract

Sovereign wealth funds are designed to solve crucial domestic policy problems. Poorly managed SWFs and SWFs that are managed as tools of economic nationalism or mercantilism will present problems for both the sponsor country and for host countries that receive SWF investment. This article discusses some of the major concerns presented by sovereign wealth, addressing both domestic and international risks. As described in the article, these risks fall along four dimensions: domestic political risks, domestic governance risks, international political risks, and international governance risks.

The IFSWF’s Santiago Principles provide a basic framework to manage and mitigate each of these types of risk, although it has limitations as a form of soft law that relies on the SWFs’ own internal compliance efforts. Notwithstanding these concerns, SWFs have proven themselves to be generally benign investors, suggesting that present governance and host country regulatory structures have successfully mitigated risks to this point. The same is not true, however, of domestic risks presented by SWFs, which remain a serious concern for governments and, to a lesser extent, markets generally.

Keywords: sovereign wealth, sovereign funds, national security,political risk, governance risk

Suggested Citation

Rose, Paul, The Political and Governance Risks of Sovereign Wealth (July 17, 2019). ANNALS OF CORPORATE GOVERNANCE Vol. 4 No. 3 PP. 147—271 (2019) , Available at SSRN: https://ssrn.com/abstract=3421350 or http://dx.doi.org/10.2139/ssrn.3421350

Paul Rose (Contact Author)

Ohio State University - Moritz College of Law ( email )

55 West 12th Avenue
Columbus, OH 43210
United States

Bocconi University - BAFFI Center on International Markets, Money, and Regulation ( email )

Milano, 20136
Italy

Tufts University - The Fletcher School of Law and Diplomacy ( email )

Medford, MA 02155
United States

Fundación Instituto de Empresa, S.L. - IE Business School ( email )

Calle Maria de Molina 12, Bajo
Madrid, Madrid 28006
Spain

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
73
Abstract Views
544
rank
385,175
PlumX Metrics