Leviathan as Foreign Investor: Evidence from Sovereign Wealth Funds
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How does state ownership affect sovereign wealth funds (SWFs) investment abroad? This dissertation aims to answer this question by providing a general theoretical framework and a detailed deal-level analysis. I argue that two attributes of state ownership affect SWF investment behaviors. First, SWFs face greater discrimination by the host country than do private investors. Since the discrimination is heightened when the home and host countries have poor political relations, SWFs are more likely to invest in host countries with which they have better political relations. Furthermore, SWFs are likely to partner with other investors in order to mitigate the discrimination by the host country. Second, state ownership leads SWFs to be more risk-tolerant than private investors. The observable implication is that SWFs are less likely to be deterred than are private investors by institutional distance between the home and host countries when investing abroad. I also argue that even though state ownership may motivate SWFs to pursue strategic interests on behalf of the home government, different governments often have different strategic objectives. This suggests that SWFs may behave differently even when investing in strategic industries. To illustrate this point, I investigate the energy industry and argue that SWFs from energy-poor countries are more likely to invest in the energy industry compared to other types of investors in pursuit of energy security for the home country. However, foreign investment in the energy industry is likely to face more resistance by the host country than investment in other industries. This resistance would increase with the deterioration of bilateral relations, especially for SWFs from energy-poor countries. To test these claims, I construct a unique dataset from several sources. My analysis covers more than 7,000 foreign acquisitions between 1981 and 2012. Using various model specifications, I find consistent evidence to support my main arguments. This dissertation contributes to the SWF studies as well as several relevant literatures. My interdisciplinary approach integrates theoretical arguments from international relations with existing international business literature. By examining the effect of state ownership on foreign investment, this dissertation enhances our understanding of the recent rise of state capitalism.
Wang, Di (2015). Leviathan as Foreign Investor: Evidence from Sovereign Wealth Funds. Doctoral dissertation, Texas A & M University. Available electronically from