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date: 22 October 2019

Abstract and Keywords

Sovereign wealth fund (SWF) investment in strategic industries has raiseumerous concerns. While state ownership may motivate SWFs to pursue strategic interests on behalf of the home government, other governments can have different strategic objectives. It suggests that SWFs may behave differently even when investing in strategic industries. This chapter illustrates the heterogeneity of SWF investment in the energy industry and argues that SWFs from energy-poor countries are more likely to invest in the energy industry compared to other types of investors in pursuit of energy security for the home country. Foreign investment in the energy industry is likely to face greater resistance by the host country than investment in other industries. This would increase with the deterioration of bilateral relations, especially for SWFs from energy-poor countries. Empirical analysis of 6,382 foreign acquisitions between 1992 and 2012 support these claims. These results are robust against alternative model specifications and variable measurements.

Keywords: sovereign wealth funds, sovereign wealth fund investment, energy security, strategic industry, bilateral relations, energy resource endowment

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