Determinants of partial versus full cross-border acquisitions for Sovereign Wealth Funds

Jeanne Amar (), Mohamed Arouri, Gilles Dufrénot () and C. Lecourt
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Jeanne Amar: GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis (1965 - 2019) - CNRS - Centre National de la Recherche Scientifique - UniCA - Université Côte d'Azur
Gilles Dufrénot: AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique
C. Lecourt: AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique

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Abstract: In this paper, we investigate the determinants of equity shares purchased by Sovereign Wealth Funds (SWFs). Based on the literature of cross-border acquisitions and entry mode choice theory, we shed light on the real drivers of these state-owned funds when they buy small or large stakes in cross-border target firms. Using an original dataset of SWF acquisitions over the period 2000–2015, a Two-Part Fractional Regression Model is estimated to account for both the fractional nature of the dependent variable as well as the separation between the decision to invest and that concerning the share of equity invested. We find that the decision to invest and the decision on the share of equity to be acquired are two distinct processes. We also find that SWFs take the investment decision in cross-border target firms by trying to reduce transaction costs and information asymmetry according to the cross-border acquisition theory, and also by taking the legal and institutional environment of the host country into consideration. However, the fact that they do not hesitate to take large shares or to acquire targeted firms that are considered to be strategic and located in politically unstable countries suggests that their motives may go beyond financial consideration.

Keywords: Sovereign Wealth Funds; Cross-border acquisitions; Entry mode choice (search for similar items in EconPapers)
Date: 2023-06-13
Note: View the original document on HAL open archive server: https://amu.hal.science/hal-04171884
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Published in Review of World Economics, inPress, ⟨10.1007/s10290-023-00504-6⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04171884

DOI: 10.1007/s10290-023-00504-6

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