Pension Reform, Ownership Structure, and Corporate Governance: Evidence from a Natural Experiment

Pension Reform, Ownership Structure, and Corporate Governance: Evidence from a Natural Experiment

Mariassunta Giannetti, Luc Laeven

Series number :

Serial Number: 
181/2007

Date posted :

June 01 2007

Last revised :

October 29 2018
SSRN Share

Keywords

  • Pension funds • 
  • control premium • 
  • Dual Class Shares • 
  • controlling shareholders

Sweden offers a unique natural experiment to analyze the microeconomic effects of institutionalized saving on ownership structure, corporate governance and performance of listed companies. First, the Swedish pension reform increased the participation of pension funds in the domestic stock market and caused a significant reshuffling in the ownership of the existing pension funds.

Second, the availability of detailed data on firm ownership allows us to document the effects of the pension reform. We show that the effects of institutional investment on firm performance depend on the industry structure of pension funds. In particular, we find that firm valuation improves if large independent private pension funds and public pension funds increase their equity stakes in the firm, but not if smaller pension funds and pension funds related to financial institutions and industrial groups increase their shareholdings. Additionally, controlling shareholders appear reluctant to relinquish control and the control premium increases if public pension funds acquire shares.

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Published in

Published in: 
Publication Title: 
The Review of Financial Studies
Description: 
Volume 22, Issue 10, Pages 4091–4127

Authors

Dr
Real name:
Luc Laeven
Research Member
Research European Central Bank