Mardi | 2016-02-23
Malik KERKOUR – Jean-Yves GNABO – Christelle LECOURT – Helene REYMOND
Sovereign wealth funds (SWFs) have been increasingly active over the past decade, raising concern from governments regarding their actual motives and potential cross-border stakes in national strategic sectors. The aim of this paper is to contribute to the existing literature to understand better the decisions taken by this new class of investors. The whole process of investment decision strategy is complex in the sense where it combines several dimensions that may potentially interact. For that, we investigate the economic determinants of SWF’s cross-border stakes while considering the whole sequence of choices involved in this decision: (i) the decision to invest abroad or not, (ii) the decision to invest in a listed versus unlisted firm, and (iii) the decision to make large versus small investment in target company. Using a nested logit approach on one of the biggest SWF, the Singaporean fund Temasek over the 1990 to 2010 period, we provide clear evidence of dependence in the three considered levels of decision. In addition, we show that Temasek’s cross-border investment probability increases with the excess of FX reserves, tends to target unlisted firms when asymmetry of information is low between the target and the home countries and involves in large stakes depending on firm financial characteristics.