Sovereign Wealth Funds: Growing Global Force Determinants

What are the determinants of Sovereign Wealth Funds dimensions? The literature has given recently a particular focus to this financial phenomenon but the determinants are still under investigation. Indeed, SWFs represent a heterogeneous group with distinctive features and yearly evolution, which complicates the assessment of this growing global force. This dissertation contributes to this understanding by investigating what are the drivers of SWFs size, namely analyzing the characteristics of each fund and sponsor countries. For the purpose of the analysis, three statistical procedures are applied: Principal Component Analysis, Linear regression model and Probit model. The initial part of the dissertation offers a complete outlook of their history and current status, characteristics, nature and purpose, providing some evidence about why SWFs are important actors of the international financial scenario. The third Section analyzes the macroeconomic implications of this phenomenon, arising many benefits and support, as well as a worldwide controversy. Given the political concerns, some SWFs target countries have passed legislation to regulate and contain foreign equity investment. However, a further analysis shows that over time and across countries, national policies are moving towards greater openness for foreign investors. Nonetheless, SWFs still have to build up a more reliable picture of their transparency. The Section IV reviews the commonly used tools in order to analyze SWFs transparency, namely the Linaburg Maduell Transparency Index, the Truman Scoreboard and the Kaufmann, Kraay and Mastruzzi Index. Finally yet importantly, the quantitative analysis is performed. It shows that SWF duration has an evident effect on its dimension. Furthermore, sponsor countries play a relevant role: the corruption level, the state of democracy and the quality of the political system clearly influence the performance and dimension of SWFs wealth. Finally, the study investigates what factors enhance the likelihood of establishment of SWFs. The main accomplishment of this dissertation is that it indicates SWFs as a potential vehicle for economic development, which only needs to build up a more reliable and transparent picture.