Public-Pension Funds Play with Newest Toy in Corporate Governance

We investigate the impact of corporate governance on physical and R&D investments in a Seemingly Unrelated Regressing (SUR) system. Marginal q’s are estimated using firm fundamental information for physical and R&D investments separately. We find that takeover pressure boosts both physical and R&D investments, public pension funds ownership has a U-shaped relation with physical investment, and greater director ownership is associated with lower physical investment and higher R&D investment. As far as investment distortions are concerned, takeover pressure mitigates the free cash flow problem and exacerbates the debt overhang problem, while public pension funds stockholding and director ownership alleviates the debt overhang for physical investment, and R&D investment, respectively.

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The Rise of State-Owned Investors: Sovereign Wealth Funds and Public Pension Funds

Annual Review of Financial Economics ◽

10.1146/annurev-financial-110420-090352 ◽

2021 ◽

Vol 13 (1) ◽

Author(s):

William L. Megginson ◽

Diego Lopez ◽

Asif I. Malik

Keyword(s):

Hedge Funds ◽

Private Equity ◽

Academic Research ◽

Pension Funds ◽

State Ownership ◽

Public Pension ◽

Annual Review ◽

Publication Date ◽

New Governance ◽

Sovereign Wealth Funds

State-owned investors (SOIs), including sovereign wealth funds and public pension funds, have $27 trillion in assets under management in 2020, making these funds the third largest group of asset owners globally. SOIs have become the largest and are among the most important private equity investors, and they are key investors in other alternative asset investments such as real estate, infrastructure, and hedge funds. SOIs are also leaders in promoting environmental, social, and governance policies and corporate social responsibility policies in investee companies. We document the rise of SOIs, assess their current investment policies, and describe how their state ownership both constrains and enhances their investment opportunity sets. We survey the most impactful recent academic research on sovereign wealth funds, public pension funds, and their closest financial analogs, private pension funds. We also introduce a new Governance-Sustainability-Resilience Scoreboard for SOIs and survey research examining their role in promoting good corporate governance. Expected final online publication date for the Annual Review of Financial Economics, Volume 13 is November 2021. Please see http://www.annualreviews.org/page/journal/pubdates for revised estimates.

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Large pension funds and the corporate governance practices of Brazilian companies

Corporate Ownership and Control ◽

10.22495/cocv9i2art6 ◽

2012 ◽

Vol 9 (2) ◽

pp. 76-84 ◽

Cited By ~ 6

Author(s):

Rodrigo Miguel de Oliveira ◽

Ricardo Pereira Câmara Leal ◽

Vinicio de Souza Almeida

Keyword(s):

Corporate Governance ◽

Institutional Investors ◽

Pension Funds ◽

Brazilian Government ◽

Good Corporate Governance ◽

Political Views ◽

Governance Practices ◽

Corporate Governance Quality ◽

The Impact

We do not find any consistent evidence that the presence of the largest Brazilian pension funds as relevant shareholders is associated to higher corporate governance scores by public Brazilian companies. Even though companies with institutional investors as relevant shareholders presented a higher average corporate governance score than other companies, they were also larger and had greater past profitability than other companies, which are common attributes of firms with better corporate governance according to the literature. The impact of Brazilian institutional investors on the corporate governance quality of their investees is either negligible or cannot be captured by the proxies we employed. Finally, we note that these two pension funds may represent the policy and political views of the incumbent Brazilian government and that the actions of their board appointees may or not reflect what is understood as good corporate governance practices.

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