Sovereign wealth fund governance: A trade-off between internal and external legitimacy

Jeanne Amar () and Christelle 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
Christelle 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 provide a better understanding of what drives sovereign wealth funds (SWFs) to improve their governance. Using the most recent SWF governance scoreboard from Maire et al. (2021), we estimate a fractional response model to determine whether SWF governance disclosure norms are driven by the search for internal or external legitimacy. Overall, we find that SWFs have better governance when they originate from democratic countries with high-quality, national governance. Our results also show that SWFs tend to have better gover-nance quality when they need to acquire external legitimacy vis-à-vis the target company and its government. In particular, we find that SWFs have an incentive to improve their governance when they are sufficiently inter-nationalized, when the amount of foreign assets invested abroad is sufficiently large or when the amount of shares acquired in developed countries is significant. These findings demonstrate how SWFs may proactively build legitimacy in host countries when they need to adapt their foreign entry strategies. Our results have important implications for understanding the determinants of SWF governance in general.

Keywords: Sovereign Wealth Funds; Governance; Transparency; Internationalization (search for similar items in EconPapers)
Date: 2023-10-03
Note: View the original document on HAL open archive server: https://amu.hal.science/hal-04231607
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Published in International Business Review, inPress, ⟨10.1016/j.ibusrev.2023.102193⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04231607

DOI: 10.1016/j.ibusrev.2023.102193

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