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The influence of pension funds on corporate governance


Schäfer, Andreas; von Arx, Urs (2014). The influence of pension funds on corporate governance. Applied Economics, 19(19):2316-2329.

Abstract

Although pension funds have gained importance in the last two decades, their role has not been described in detail by economic models. This article focuses on the scope of these institutional investors when they are not satisfied with a management team of a company in which the pension fund holds a block of shares. Stock holdings by pension funds are largely dispersed. Therefore, any intervention by pension funds in corporate governance requires the formation of a coalition of pension funds. The realization of a coordinated intervention, in turn, is subject to the problems related to the provision of public goods, such as free riding. We find that the stock dispersion and the combined share of pension funds, coordination costs and the attractiveness of the exit option are relevant factors for determining the probability of the success of interventions.

Although pension funds have gained importance in the last two decades, their role has not been described in detail by economic models. This article focuses on the scope of these institutional investors when they are not satisfied with a management team of a company in which the pension fund holds a block of shares. Stock holdings by pension funds are largely dispersed. Therefore, any intervention by pension funds in corporate governance requires the formation of a coalition of pension funds. The realization of a coordinated intervention, in turn, is subject to the problems related to the provision of public goods, such as free riding. We find that the stock dispersion and the combined share of pension funds, coordination costs and the attractiveness of the exit option are relevant factors for determining the probability of the success of interventions.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Center for Corporate Responsibility and Sustainability
Dewey Decimal Classification:330 Economics
Language:English
Date:28 March 2014
Deposited On:13 May 2014 13:26
Last Modified:05 Apr 2016 17:51
Publisher:Taylor & Francis
ISSN:0003-6846
Publisher DOI:https://doi.org/10.1080/00036846.2014.899670
Related URLs:http://www.ccrs.uzh.ch (Author)
Permanent URL: https://doi.org/10.5167/uzh-95555

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