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Sovereign wealth funds’ cross-border investments: Assessing the role of country-level drivers and spatial competition

Author

Listed:
  • Debarsy, Nicolas
  • Gnabo, Jean-Yves
  • Kerkour, Malik

Abstract

The aim of this paper is to identify the driving forces of cross-border investments emanating from Sovereign wealth funds and to test the existence of spatial competition among recipient countries. For this, we develop an original econometric framework that quantifies the role of spatial dependence in the location of investments, and that uses a modified version of the standard estimation procedure of spatial panel model, which accommodates the Inverse Hyperbolic Sine transformation of the dependent variable. This transformation copes with two critical features of net capital flows, namely an highly skewed distribution and the presence of zero and negative values. Using a large-scale database, we provide evidence of negative spatial dependence, investments in one country being on average at the expense of its neighbors.

Suggested Citation

  • Debarsy, Nicolas & Gnabo, Jean-Yves & Kerkour, Malik, 2017. "Sovereign wealth funds’ cross-border investments: Assessing the role of country-level drivers and spatial competition," Journal of International Money and Finance, Elsevier, vol. 76(C), pages 68-87.
    • Handle: RePEc:eee:jimfin:v:76:y:2017:i:c:p:68-87
    DOI: 10.1016/j.jimonfin.2017.05.007
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    Cited by:

    1. Huadong Chang & Guozhi An, 2019. "Leviathan is in Action? The Political Motivation behind the Outbound Investments of SWFs," Advances in Management and Applied Economics, SCIENPRESS Ltd, vol. 9(5), pages 1-4.
    2. Bahoo, Salman & Alon, Ilan & Paltrinieri, Andrea, 2020. "Sovereign wealth funds: Past, present and future," International Review of Financial Analysis, Elsevier, vol. 67(C).
    3. Amar, J. & Lecourt, C. & Carpantier, J.F., 2022. "GCC Sovereign Wealth Funds: Why do they take control?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 77(C).
    4. Megginson, William L. & Gao, Xuechen, 2020. "The state of research on sovereign wealth funds," Global Finance Journal, Elsevier, vol. 44(C).
    5. Gangi, Francesco & Mustilli, Mario & Varrone, Nicola & Graziano, Domenico, 2023. "Target firms’ characteristics and the effects of sovereign wealth funds’ investments: Does cultural context of SWFs matter?," Research in International Business and Finance, Elsevier, vol. 65(C).
    6. Grira, Jocelyn & Labidi, Chiraz & Rouatbi, Wael, 2022. "Does political risk matter for sovereign wealth funds? International evidence," International Review of Financial Analysis, Elsevier, vol. 81(C).
    7. Grira, Jocelyn, 2020. "Back to government ownership: The Sovereign Wealth Funds phenomenon," Finance Research Letters, Elsevier, vol. 34(C).
    8. Alvaro Cuervo-Cazurra & Anna Grosman & William L. Megginson, 2023. "A review of the internationalization of state-owned firms and sovereign wealth funds: Governments’ nonbusiness objectives and discreet power," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 54(1), pages 78-106, February.
    9. Dai, Liyan & Song, Chengxuan & You, Yu & Zhang, Wenqiao, 2022. "Do sovereign wealth funds value ESG engagement? Evidence from target firm's CSR performance," Finance Research Letters, Elsevier, vol. 50(C).
    10. Balestra, Anna & Caruso, Raul & Di Domizio, Marco, 2024. "What explains the size of Sovereign Wealth Funds? A panel analysis (2008–2018)," Finance Research Letters, Elsevier, vol. 62(PB).
    11. Alvaro Cuervo-Cazurra & Anna Grosman & Geoffrey T. Wood, 2023. "Cross-country variations in sovereign wealth funds’ transparency," Journal of International Business Policy, Palgrave Macmillan, vol. 6(3), pages 306-329, September.

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    Keywords

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    JEL classification:

    • C18 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Methodolical Issues: General
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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