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1 – 10 of over 5000Christopher Balding and Yao Yao
Purpose – Study the investment and risk management approach of sovereign wealth funds when national wealth including natural resources is accounted for rather than only financial…
Abstract
Purpose – Study the investment and risk management approach of sovereign wealth funds when national wealth including natural resources is accounted for rather than only financial asset.
Methodology/Approach – Using a range of widely used asset classes, we simulate sovereign wealth fund returns when considering only financial assets but also under varying levels of national wealth holdings in oil. We optimize two-asset financial portfolios and three-asset portfolios when including oil to maximize the risk-adjusted returns.
Findings – Sovereign wealth funds by failing to invest for the national wealth portfolio are overlooking a major source of volatility. To reduce the level of volatility associated with yearly national wealth returns, allocating a higher percentage of fixed assets to high-quality fixed income and low-risk equities will maximize the risk-adjusted returns of national wealth for sovereign wealth fund states.
Social implications – By focusing solely on the financial assets managed by sovereign wealth funds, states are exposing themselves to significant national wealth risk.
Originality/Value of the paper – This is the first work to estimate the impact on national wealth of oil-dependent states by failing to account for volatile commodity prices through the investment strategies of sovereign wealth funds.
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The purpose of this paper is to examine the propensity of sovereign wealth funds (SWFs) for shareholder activism and their potential impact on corporate governance.
Abstract
Purpose
The purpose of this paper is to examine the propensity of sovereign wealth funds (SWFs) for shareholder activism and their potential impact on corporate governance.
Design/methodology/approach
The study highlights the relationships between SWFs and corporate governance and also applies eight antecedents/determinants of institutional activism to analyze whether SWFs have a predisposition for shareholder activism.
Findings
The study only finds two instances of SWF activism. Additionally, it finds that despite their mostly passive investments, SWFs possess a natural tendency toward shareholder activism. Some are more likely to engage in activism than others, however. SWFs with a higher proportion of their assets invested in equities, those with portfolios fully or partially constructed to emulate the broader financial markets through indexing, and those that depend less on external fund managers are the likeliest candidates for activism. The study also finds that the regulatory environment can curb the natural SWF inclination for activist behavior.
Research limitations/implications
Due to the lack of transparency within the SWF universe, this study largely depends on the limited data available for sovereign wealth funds.
Practical implications
Given the growing importance of SWFs, managers, directors, and policymakers must assess SWF activism, its influence on corporate governance, and its implications for public policy deliberations.
Originality/value
This project, to the best of the author's knowledge, is the first study that applies tested financial models to SWFs in order to determine if they have inherent activist tendencies.
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This paper aims to investigate the idea of building responsible borrowing and lending into sovereign wealth fund (SWF) decision-making. SWFs, which currently manage US$8 trillion…
Abstract
Purpose
This paper aims to investigate the idea of building responsible borrowing and lending into sovereign wealth fund (SWF) decision-making. SWFs, which currently manage US$8 trillion in assets, are influential institutional investors, but their role in sovereign debt markets needs to be further explored. In this context, this paper aims to critically assess the linkages and convergences between the Santiago Principles on SWF and the United Nations Conference on Trade and Development (UNCTAD) principles on responsible sovereign lending and borrowing.
Design/methodology/approach
This paper draws on legal scholarship, reports, policy papers and other open-source data to explore the role of SWFs in sovereign lending, borrowing and debt restructuring.
Findings
Building responsible borrowing and lending into SWF decision-making is feasible and justified on the grounds of both ethics and public duty. It is also justified in financial terms because it would protect SWFs from irresponsible lending and borrowing practices at the micro level while contributing to global financial stability at the macro level.
Originality/value
This is the first comprehensive study to juxtapose two important normative processes, the Santiago Principles and the UNCTAD Principles.
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Narjess Boubakri, Jean-Claude Cosset and Nabil Samir
Purpose – Run a comparative analysis between investments of sovereign wealth funds (SWFs) and mutual funds, focusing on firm-level, country-level, and institutional…
Abstract
Purpose – Run a comparative analysis between investments of sovereign wealth funds (SWFs) and mutual funds, focusing on firm-level, country-level, and institutional variables.
Methodology/approach – We use a hand-collected sample of 1,845 acquisitions around the world over the last 25 years (251 for SWFs and 1,594 for mutual funds). We then run univariate parametric and nonparametric tests to assess the differences in the investments of both subsamples.
Findings – We review the literature on the determinants of SWFs' investment decisions. Our analysis adds to the scarce available literature on the investment decisions of SWFs and their comparison with other institutional investors. Our results show that, compared to mutual funds, SWFs indeed exhibit different preferences: for instance, SWFs prefer to acquire stakes in larger, less liquid companies which are financially distressed but which also have a higher level of growth opportunities. They also prefer less innovative firms with more concentrated ownership, which are located in less developed but geographically closer countries with whom they do not necessarily share cultural and religious backgrounds.
Social implications – Our results are important for practitioners and firms seeking to attract a given type of institutional investment. They also add insights to the debate on the “hidden” political objectives behind SWF investments in the Western world.
Originality/value of paper – This is the first attempt to empirically assess the differences in the investment choices of SWFs and mutual funds.
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Daniel A. Nelson, Kate Habershon, Kathryn W. Hambrick, Meghan E. McCarthy, Alexios S. Hadji and Grace Tan
To discuss US, EU and UK tax-related issues that sovereign wealth funds should consider when investing in private funds.
Abstract
Purpose
To discuss US, EU and UK tax-related issues that sovereign wealth funds should consider when investing in private funds.
Design/methodology/approach
Discusses various tax-related structuring, operational, risk-allocation, and economic matters that private funds, sovereign wealth funds and other non-US institutional investors should consider a series when evaluating potential private fund investments.
Findings
Despite the market disruption caused by the COVID-19 pandemic, sovereign wealth funds continued to make significant capital commitments to private funds in 2020 and, as the world emerges from the pandemic, are expected to make similar or greater commitments in 2021 and beyond.
Originality/value
Practical guidance from lawyers with wide experience in international tax planning and investment fund structuring.
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Sivakumar Velayutham and Rashedul Hasan
The purpose of this paper is to critically discuss the participation of sovereign wealth funds (SWFs) in the corporate social responsibility (CSR) programmes. Sovereign wealth…
Abstract
Purpose
The purpose of this paper is to critically discuss the participation of sovereign wealth funds (SWFs) in the corporate social responsibility (CSR) programmes. Sovereign wealth funds in emerging economies are often involved in corporate social responsibility. However, the 1 Malaysian Development Berhad (1MDB) scandal illustrates the possible use of SWF as a vehicle for corruption and abuse.
Design/methodology/approach
The primary objective is to develop good governance practices of CSR by SWFs that could limit corrupt practices. A case study approach is adopted to investigate the CSR involvement of two SWFs – Norway’s Government Pension Fund Global (GPFG) and Abu Dhabi Fund for Development (ADFD).
Findings
The finding shows that SWFs should not be directly involved in CSR. It is proposed that independent Non-government Organisations (NGOs), through a competitive funding model, could serve the CSR purpose of SWFs more effectively and bring socio-economic changes in emerging economies.
Originality/value
The funding model identifies the expected outcomes, priorities and uses of the funds. The funding committee should also be independent of the Board and transparent in its allocations.
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This paper aims to systematically review all available evidence on the implications of sovereign wealth funds (SWFs) for various stakeholders (recipients of sovereign investment…
Abstract
Purpose
This paper aims to systematically review all available evidence on the implications of sovereign wealth funds (SWFs) for various stakeholders (recipients of sovereign investment, home countries, which incorporate SWFs and the world at large) and offer future research directions.
Design/methodology/approach
A systematic literature review (SLR) technique is used to review 102 handpicked articles for the period 2005‐2019.
Findings
This review reveals that the literature on the impact of SWFs emerged only during the financial crisis of 2008–2011 and much of it is qualitative in nature. The literature is lopsidedly focused on the impact of SWFs on target firms and there has been a limited empirical investigation of the impact on other stakeholders. There is a lack of consensus in several areas, which calls for additional research. Few areas, which have not been addressed in the literature and can be taken up by future researchers include the impact of SWFs on macroeconomic fundamentals and stock markets of recipient countries, especially emerging economies; implications of SWFs for alternative asset classes; impact on the welfare of citizens and internationalization strategies of home countries; impact on initial public offerings and unlisted corporations; and impact on innovativeness, efficiency and corporate governance practices of target firms.
Originality/value
To the best of the authors’ knowledge, this is the first paper to use the SLR technique to review the literature on SWFs. It considers the impact of SWFs on all stakeholders and covers both qualitative and quantitative literature published over a long period of 2005‐2019. It also systematizes all available evidence on this theme and identifies important research gaps, which may be helpful for academicians, practitioners and policymakers.
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Salman Bahoo, M. Kabir Hassan, Andrea Paltrinieri and Ashraf Khan
The purpose of this paper is to propose a model of the Islamic sovereign wealth funds (ISWFs) based on Islamic finance principles to modify the precarious image of SWFs from…
Abstract
Purpose
The purpose of this paper is to propose a model of the Islamic sovereign wealth funds (ISWFs) based on Islamic finance principles to modify the precarious image of SWFs from Muslim countries. The Shariah laws are the cardinal direction for this study.
Design/methodology/approach
The authors applied a qualitative research technique that consists of three approaches: exploratory case study approach to critically examine and rank the existing status of SWFs; descriptive analysis; and content analysis to present a model of ISWFs in comparison of conventional SWFs.
Findings
The authors propose a model of the “Islamic Sovereign Wealth Funds” based on four key pillars: the major Shariah principles; the Islamic corporate governance framework; the Islamic transparency and disclosure framework; and the Islamic corporate social responsibility framework. Furthermore, the authors argue that the potential effect of the ISWFs on Islamic finance and economy will be positive.
Research limitations/implications
The model is an initial work and idea to convert SWFs from Muslim countries into ISWFs, which required an in-depth policy review by governments.
Practical implications
The findings of the paper are useful for policymakers and governments of the Muslim countries to overcome the issues and criticism on SWFs by converting them in ISWFs.
Originality/value
This paper contributes to the literature related to Islamic finance and sovereign wealth fund by presenting a first model of ISWFs for Muslim countries.
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Prospects for vulture fund activity.
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DOI: 10.1108/OXAN-DB198825
ISSN: 2633-304X
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Topical
This paper assessed accuracy level in accounting for government funds in Nigeria's federal treasury and their faithful presentation in government financial reporting. It aimed to…
Abstract
Purpose
This paper assessed accuracy level in accounting for government funds in Nigeria's federal treasury and their faithful presentation in government financial reporting. It aimed to determine whether the reported annual balances in Nigeria's financial reporting were reliable or otherwise. Data used in analysis were obtained from secondary sources from federal treasury.
Design/methodology/approach
Ex-post “facto” analysis method was adopted in the study involving the use of statistical techniques of absolute or aggregate mean percentage error derived from differences between recomputed and published fund balances and was employed. This was augmented with interactive review meetings of the initial case research report with the management of Nigeria's audit agency.
Findings
Results distilled from the consolidated revenue fund (CRF), development fund and public debt show that recomputed values were greater than the fund balances in the gazetted financial statements. Results for contingency fund (CTF), federation account fund (FAF), special trust fund (STF) and sundry deposit fund yield equal figures and accurate. The paper concludes that there were serial understatements of the core public fund balances in the financial statements over the years. This trend of reporting incorrect in three core public funds in financial statements rendered Nigeria's financial position unreliable in the affected years for decisions. It also facilitated frauds, mismanagement of funds and corrupt practices.
Research limitations/implications
The scope of the research is restricted to assessment of degree of accuracy in fund accounting, faithful representation of the respective fund balance in the liabilities side of FGN balance sheet and the reliability of the financial position. But, it did not consider or cover the implementation of International Public Sector Accounting Standards (IPSASs) in federal treasury since FGN had not issued any full IPSAS–oriented financial statements as on 2015.
Practical implications
Identification of deficiencies in fund account balances, structural defects in fund accounting and acts of understatement of carrying balances in CRF and capital development fund (CDF) implies that the aggregate core fund liabilities reported in financial statement of government entities without corresponding assets do not actually reflect a true and fair financial position in some countries. It reveals remarkable degree of financial information asymmetry in government financial reporting. Illusionary fund accounting has direct linkage to poor fiscal governance in many sovereign with associated sub-optimal delivery of public goods and service level distress syndrome in many economies; lead to poverty, unemployment, crisis and macroeconomic disturbances.
Social implications
The study contributes to the development of fund accounting system; strengthening government financial reporting architecture and practices. It provides framework for tracking financial information asymmetry in government financial reporting and mismanagement of public funds. It provides platform to effect necessary adjustment (correction) during the “first time 3-year adoption” adjustment window in Nigeria. Flowing from the findings, it advocates for institutionalization of government fund accounting standards and provides evidence for migration to accrual accounting system in countries that have not already implemented it. Evaluation system developed herein will improve fund management in federal treasury and contribute to efficient public financial management, good governance and enhance development of public accounting practice.
Originality/value
This exploratory empirical research is the one to ever evaluate accuracy level of fund accounting in sovereign entities and faithful representation in government's financial position prior to implementation of accrual accounting and financial reporting. The study established substantial level of illusionary accounting for public funds and information asymmetry in published government's financial reporting. It is necessary to rectify these discrepancies in fund accounting and financial reporting prior to and or during the first three years of the IPSAS transition implementation programme. These research deliverables provide adopters with relevant data for adjustment accounting during the transition period in strengthening public financial reporting in order to realize the benefit of full IPSAS accrual accounting.
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