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Using a sample of 1,590 purchases of stock by sovereign wealth funds (SWFs) in listed firms in 78 target countries between 1985 and 2011, we study the country‐level determinants of SWF cross‐border investment. We find that SWFs from countries with high levels of openness and economic development, but with less developed local capital markets, will make more cross‐country transactions, while target countries with higher levels of investor protection and more developed capital markets will attract more SWF investment. Our findings support the investment facilitation hypothesis, suggesting that SWFs act purely or principally as commercial investors facilitating cross‐border corporate investment.

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We find that U.S. corporations' demand for liquidity is sensitive to two important factors: uncertainty facing the firm and the quality of corporate governance. Following prior research, we find that both factors have important influences on firms' cash holdings. Our results also indicate that the interactions between uncertainty and governance measures are significant. From a policy perspective, these new findings indicate both governance and the nature of uncertainty may play an important role in managing liquidity risks. Policy recommendations may not only be limited to changes in financial policy but may also include changes in corporate governance.

Abstract:We collected data pertaining to Chinese listed commercial banks from 2008 to 2016 and found that the competition between banks is becoming increasingly fierce. Commercial banks have actively carried out diversification strategies for greater returns, and the financial reports show that profits are increasingly coming from the non-interest income benefits of diversification strategies. However, diversification comes with risk. We built a panel threshold model and investigated the effect of income diversification on a bank's profitability and risk. Diversification was first measured by the Herfindahl-Hirschman index (HHI), and the results show that there is a nonlinear relationship between diversification and profitability or risk does exist. We introduced an interesting index based on the entropy to test the robustness of our model and found that a threshold effect exists in both our models, which is statistically significant. We believe the combination of the entropy index (ENTI) and the HHI enables more efficient study of the relationship between diversification and profitability or risk more efficiently. Bankers and their customers have increasingly been interested in income diversification, and they value risk as well. We suggest that banks of different sizes should adopt the corresponding diversification strategy to achieve sustainable development.

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