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Does political risk matter for sovereign wealth funds? International evidence

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  • Grira, Jocelyn
  • Labidi, Chiraz
  • Rouatbi, Wael

Abstract

We investigate the impact of political risk on the investment decisions of sovereign wealth funds (SWFs). Using an international sample of 302 targets involved in 427 SWFs' deals, we find that political risk matters in determining SWFs' portfolio strategies. Among the four dimensions of political risk, we show that conflicts and democratic tendencies are the main components that explain variations in SWF behaviour, whereas the quality of institutions and government action matter less. Our results are robust to a battery of sensitivity tests, alternative model specifications, subsample analysis, and cultural bias.

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  • 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).
    • Handle: RePEc:eee:finana:v:81:y:2022:i:c:s1057521918301467
    DOI: 10.1016/j.irfa.2018.07.013
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    1. 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).

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