Does relationship lending matter in an emerging market?Journal articleNaël Shehadeh, Faicel Belaid, Gilles Dufrénot and Christelle Lecourt, Applied Economics, pp. 1-17, 2023

Based on a unique database (data on 2529 bank-firm relationships of 403 firms from 2012 to 2018) provided by the Central Bank of Tunisia, this article analyses the impact of the intensity and duration of bank-firm relationship on loan quality. By estimating a panel ordered probit model, the results show that the intensity of the lending relationship has a positive (negative) impact on high (medium or low) quality loans. In addition, the duration of the bank-firm relationship increases the probability of low-quality loans. We also find that the impact of relationship lending on loan quality differs according to the level of profitability of the firm. Low and non-performing firms tend to have longer and closer bank relationship, whereas it is the opposite for performing firms. Our results suggest that in an emerging market concentrated around a few banks, longer and closer banking relationships are mainly in favour of low and non-performing firms, reflecting adverse selection and strong moral hazard.

Determinants of partial versus full cross-border acquisitions for Sovereign Wealth FundsJournal articleJeanne Amar, Mohamed Arouri, Gilles Dufrénot and Christelle Lecourt, Review of World Economics, 2023

In this paper, we investigate the determinants of equity shares purchased by Sovereign Wealth Funds (SWFs). Based on the literature of cross-border acquisitions and entry mode choice theory, we shed light on the real drivers of these state-owned funds when they buy small or large stakes in cross-border target firms. Using an original dataset of SWF acquisitions over the period 2000–2015, a Two-Part Fractional Regression Model is estimated to account for both the fractional nature of the dependent variable as well as the separation between the decision to invest and that concerning the share of equity invested. We find that the decision to invest and the decision on the share of equity to be acquired are two distinct processes. We also find that SWFs take the investment decision in cross-border target firms by trying to reduce transaction costs and information asymmetry according to the cross-border acquisition theory, and also by taking the legal and institutional environment of the host country into consideration. However, the fact that they do not hesitate to take large shares or to acquire targeted firms that are considered to be strategic and located in politically unstable countries suggests that their motives may go beyond financial consideration.

GCC Sovereign Wealth Funds: Why do they take control?Journal articleJeanne Amar, Christelle Lecourt and Jean-François Carpantier, Journal of International Financial Markets, Institutions and Money, Volume 77, pp. 101494, 2022

In this paper, we investigate what are the drivers of cross-border equity acquisitions made by Sovereign Wealth Funds (SWFs) of the Gulf Cooperation Council (GCC) countries. GCC SWFs are considered as relatively opaque investors and strongly politicized, raising some concerns for perceived political and security risks. Using both Logit and ordered Logit models, we test if the usual determinants of SWFs investments still stand when we look at large or majority acquisitions made by GCC SWFs. Unlike results found in the literature investigating the determinants of SWFs cross-border investments, we find that GCC SWFs do not take into account the financial characteristics of the target firm by taking majority stakes, apart from its financial wealth. The economic, institutional and financial factors of the target country as well as the existence of trade agreements between both countries do not matter in their acquisition/control decision. We also find that firms operating in strategic sectors are targeted by GCC SWFs for diversification purposes but not for the purpose of acquisition or control. Overall, our results lend support to the hypothesis that GCC SWFs differ from other institutional investors in terms of acquisition decision strategy and that financial and commercial motives are not the exclusive target of their acquisition strategy.

Modeling Time-Varying Conditional Betas. A Comparison of Methods with Application for REITsBook chapterMarcel Aloy, Floris Laly, Sébastien Laurent and Christelle Lecourt, In: Recent Econometric Techniques for Macroeconomic and Financial Data, Gilles Dufrénot and Takashi Matsuki (Eds.), 2021-01, pp. 229-264, Springer International Publishing, 2021

Beta coefficients are the cornerstone of asset pricing theory in the CAPM and multiple factor models. This chapter proposes a review of different time series models used to estimate static and time-varying betas, and a comparison on real data. The analysis is performed on the USA and developed Europe REIT markets over the period 2009–2019 via a two-factor model. We evaluate the performance of the different techniques in terms of in-sample estimates as well as through an out-of-sample tracking exercise. Results show that dynamic models clearly outperform static models and that both the state space and autoregressive conditional beta models outperform the other methods.

Jumps et modèles de type GARCH (Chapitre 3)Book chapterSébastien Laurent and Christelle Lecourt, In: Méthodes de prévisions en finance, A. Charles, O. Darné and L. Ferrara (Eds.), 2020-09, pp. 53-68, 2020
Country Factors and Investment Decision-Making Process of Sovereign Wealth FundsJournal articleJeanne Amar, Bertrand Candelon, Christelle Lecourt and Zhou Xun, Economic Modelling, Volume 80, pp. 34-48, 2019

We examine in this paper the complex decision-making processes that lead to investment location choice of Sovereign Wealth Funds (SWFs). Using a two-tiered dynamic Tobit panel model, we find that country-level factors do not have the same impact on the investment decision and the amount to invest and that SWFs tend to invest more frequently and with higher amounts in countries in which they already have invested. More specifically, we find that SWFs prefer to invest in countries with higher political stability, whereas they are more prone to investing for large amounts in countries that are less democratic and more financially opened. Our results also lend support to the idea that SWFs are prudent in the choice of target country concerning their investment decision but behave as more opportunistic investors concerning the amounts to be invested.

Is the emergence of new sovereign wealth funds a fashion phenomenon?Journal articleJeanne Amar, Christelle Lecourt and Valerie Kinon, Review of World Economics, Volume 154, Issue 4, pp. 835-873, 2018

The paper deals with the important financial policy issue of the decision for a country to establish a sovereign wealth fund (SWF). Using a large-scale database, we analyze the economic, political and institutional factors that should be considered in such a decision. In particular, we test if the emergence of SWFs and more specifically of a specific type of SWFs can be explained by the following factors: the excess foreign exchange reserves due to natural resources rents or persistent current account surpluses; the volatility of commodity prices; the appreciation of the real exchange rate leading to the “Dutch Disease” effect and the governance of the country. The results suggest that countries with excess foreign exchange reserves, which are dependent on a commodity and which suffer from an appreciation of the real exchange rate are more likely to create a fund. We also find that commodity-based funds tend to be established in low democratic countries. Finally, our results suggest that the factors driving SWFs creation are different depending on the origin of the funding (commodity or non-commodity) and the macroeconomic objective(s) assigned to the fund. Our results may be of interest for policymakers debating whether or not it can be optimal for the country to establish a SWF.

Understanding the decision-making process of sovereign wealth funds: The case of TemasekJournal articleJ. Y. Gnabo, Malik Kerkour, Christelle Lecourt and Helen Raymond, International Economics, Volume 152, pp. 91-106, 2017

Sovereign wealth funds (SWFs) have been increasingly active over the past decade, with governments raising concern regarding their actual motives and the potential for cross-border interest in national strategic sectors. The aim of this paper is to contribute to the existing literature by improving our understanding of the decisions being taken by this new class of investors. The decision-making process informing such investments is complex in the sense that it involves several levels of decision that may potentially interact. In this study, we investigate the determinants of SWFs' foreign investments, while considering in a single model the sequence of choices involved in their decisions, specifically (i) the decision to invest abroad or not, (ii) the decision to invest in a listed versus unlisted firm, and (iii) the decision to take large versus small stakes. Using a nested logit approach on one of the largest SWFs, the Singaporean fund Temasek, over the period 1990–2010, we provide clear evidence of dependence in the three levels of decision making considered. In addition, we show that the probability of Temasek's cross-border investment increases with the excess of foreign exchange (FX) reserves, that the SWF tends to target unlisted firms when asymmetry of information is low between the target company and its home country, and that its involvement in large stakes depends on a firm's financial characteristics.

Testing for jumps in conditionally Gaussian ARMA-GARCH models, a robust approachJournal articleSébastien Laurent, Christelle Lecourt and Franz C. Palm, Computational Statistics & Data Analysis, Volume 100, Issue C, pp. 383-400, 2016

Financial asset prices occasionally exhibit large changes. To deal with their occurrence, observed return series are assumed to consist of a conditionally Gaussian ARMA-GARCH type model contaminated by an additive jump component. In this framework, a new test for additive jumps is proposed. The test is based on standardized returns, where the first two conditional moments of the non-contaminated observations are estimated in a robust way. Simulation results indicate that the test has very good finite sample properties, i.e. correct size and high proportion of correct jump detection. The test is applied to daily returns and detects less than 1% of jumps for three exchange rates and between 1% and 3% of jumps for about 50 large capitalization stock returns from the NYSE. Once jumps have been filtered out, all series are found to be conditionally Gaussian. It is also found that simple GARCH-type models estimated using filtered returns deliver more accurate out-of sample forecasts of the conditional variance than GARCH and Generalized Autoregressive Score (GAS) models estimated from raw data.

The Intra-Day Impact of Communication on Euro-Dollar Volatility and JumpsJournal articleHans Dewachter, Deniz Erdemlioglu, Jean-Yves Gnabo and Christelle Lecourt, Journal of International Money and Finance, Volume 43, pp. 131-154, 2014

In this paper, we examine the intra-day effects of verbal statements and comments on the FX market uncertainty using two measures: continuous volatility and discontinuous jumps . Focusing on the euro-dollar exchange rate, we provide empirical evidence of how these two sources of uncertainty matter in measuring the short-term reaction of exchange rates to communication events. Talks significantly trigger large jumps or extreme events for approximately an hour after the news release. Continuous volatility starts reacting prior to the news, intensifies around the release time and stays at high levels for several hours. Our results suggest that monetary authorities generally tend to communicate with markets on days when uncertainty is relatively severe, and higher than normal. Disentangling the US and Euro area statements, we also find that abnormal levels of volatility are mostly driven by the communication of the Euro area officials rather than US authorities.

Sovereign wealth fund governance: A trade-off between internal and external legitimacyJournal articleJeanne Amar and Christelle Lecourt, International Business Review, Volume 32, Issue 6, pp. 102193, Forthcoming

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 governance 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 internationalized, 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.