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Rationality or politics? The color of black gold money

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  • Arouri, Mohamed
  • Boubaker, Sabri
  • Grais, Wafik
  • Grira, Jocelyn

Abstract

The present study investigates the determinants of Arab sovereign wealth funds (SWFs) investment decisions. Using a sample of 223 listed firms targeted by SWFs over the 2000–2014 period (among which 73 are targeted by SWFs owned by Arab countries), we find that, in comparison to non-Arab SWFs, Arab SWFs prefer larger firms operating in strategic industries based in countries with higher levels of economic and capital market development, political stability, significant degree of confidence in rules and low degree of corruption. Moreover, Arab SWFs do not seem to have a tendency to invest in firms with higher liquidity, profitability, growth or dividend payout. Taken together, results based on the sample suggest that Arab SWFs’ acquisitions may not be solely motivated by purely financial considerations.

Suggested Citation

  • Arouri, Mohamed & Boubaker, Sabri & Grais, Wafik & Grira, Jocelyn, 2018. "Rationality or politics? The color of black gold money," The Quarterly Review of Economics and Finance, Elsevier, vol. 70(C), pages 62-76.
    • Handle: RePEc:eee:quaeco:v:70:y:2018:i:c:p:62-76
    DOI: 10.1016/j.qref.2018.05.002
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    2. 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).
    3. Grira, Jocelyn, 2020. "Back to government ownership: The Sovereign Wealth Funds phenomenon," Finance Research Letters, Elsevier, vol. 34(C).
    4. Alhashel, Bader S. & Albader, Sulaiman H., 2020. "How do sovereign wealth funds pay their portfolio companies’ executives? Evidence from Kuwait," International Review of Economics & Finance, Elsevier, vol. 67(C), pages 303-322.
    5. Knut Anton Mork & Fabian Andsem Harang & Haakon Andreas Tr{o}nnes & Vegard Skonseng Bjerketvedt, 2022. "Dynamic spending and portfolio decisions with a soft social norm," Papers 2212.10053, arXiv.org.
    6. 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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    More about this item

    Keywords

    Sovereign wealth funds; Arab region; Investment strategies; Political influence;
    All these keywords.

    JEL classification:

    • 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

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