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The role of sovereign wealth funds in the global capital markets

Behbehani, F. M. (2021) The role of sovereign wealth funds in the global capital markets. PhD thesis, University of Reading

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Abstract/Summary

This thesis examines the topic of sovereign wealth fund (SWF) sustainability and its relationship with a country’s strategic resources. When the relevant literature on SWFs is reviewed, it is found that these topics are seldom examined. There are studies that focus on the financial performance of SWFs, but the sustainability of SWFs did not attract enough attention in the academic and business circles. This thesis fills this conceptual gap by developing measures of SWF sustainability and country-level strategic resources and then connecting them in a novel conceptual model of SWF sustainability. Towards this aim, three sustainability measures are identified. These measures are investments in alternative asset classes, the employment of external fund managers, and spending on social and environmental projects and causes. When these measures are reviewed through different theories, it is found that the resource-based theory can justify the employment of external fund managers, while the natural resource-based theory justifies the spending on social and environmental projects and causes, and the portfolio diversification theory can be used to justify the investments in alternative asset classes. The resource-based theory is also used in establishing the new conceptual model of SWF sustainability. This theory argues that the resources and capabilities that companies possess matter for their competitive advantage and sustainability. However, this theory does not take country-level factors into account. In this context, the thesis extends the resourcebased theory to the SWFs domain and incorporate the country-level strategic resources into the new model. So, this model of SWF sustainability postulates that countries’ strategic resources would positively affect their SWFs’ sustainability. 3 To test the relevant research hypotheses of the SWF sustainability model, the thesis uses firm-level data from 56 SWFs, covering the period of 2007-2017. There are four independent variables (i.e., the human development index, the innovation index, the reputation index, and FDI inflows) representing the country-level strategic resources and three dependent variables (i.e., the dummy for alternative asset classes, the dummy for employing external fund managers, and the dummy for social and environmental expenditures). The relationships between these dependent and independent variables are examined quantitatively using descriptive statistics, pairwise correlations, scatter plots, t-tests, and finally logistic and ordered logistic regressions. The results from different quantitative methods usually support each other. Overall, these quantitative results show that there is strong empirical support for the first two dimensions of SWF sustainability, which are investing in alternative asset classes and employing external fund managers. However, empirical evidence for the third SWFs dimension is relatively weak.

Item Type:Thesis (PhD)
Thesis Supervisor:Kalyuzhnova, Y. and Lazar, E.
Thesis/Report Department:Henley Business School
Identification Number/DOI:
Divisions:Henley Business School > Business Informatics, Systems and Accounting
ID Code:98233
Date on Title Page:2020

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