RFS Advance Access published online on October 8, 2008
Review of Financial Studies, doi:10.1093/rfs/hhn091
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Pension Reform, Ownership Structure, and Corporate Governance: Evidence from a Natural Experiment
Stockholm School of Economics, CEPR, and ECGI
International Monetary Fund, Research Department, CEPR, and ECGI, Center, Tilburg University
Send correspondence to Mariassunta Giannetti, Stockholm School of Economics, PO Box 650, Sveavagen 65, S 11 383 Stockholm, Sweden; telephone +46-8-7369607; fax: +46-8-312327; E-mail: mariassunta.giannetti{at}hhs.se
JEL Classification: G3, G23
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Abstract |
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Sweden offers a unique natural experiment to analyze the effects of institutionalized saving on the ownership structure, corporate governance, and firm performance. The Swedish pension reform increased the stock market participation of pension funds, causing a significant reshuffling in the ownership of pension funds. We show that the effects of institutional investment on firm performance depend on the industry structure of pension funds. Firm valuation improves if public pension funds and large independent private pension funds increase their shareholdings. Additionally, controlling shareholders appear reluctant to relinquish control and the control premium increases if public pension funds acquire shares.
We would like to thank Michael Weisbach (the editor), an anonymous referee, Matias Braun, Mike Burkart, Vidhi Chhaochharia, Stijn Claessens, Andrew Ellul, Zacharias Sautner, Per Stromberg, Matti Suominen, and seminar participants at the American Economic Association Meeting (Chicago), the CEPR Conference on Corporate Finance and Risk Management (Solstrand), the CEPR/Gerzensee European Summer Symposium in Financial Markets, European Finance Association (Ljubljana), the London Business School Corporate Governance Conference, the ECB-CFS Research Network Conference on Asset Management, Private Equity Firms and International Capital Flows (Dublin), the Stockholm School of Economics, the Swedish Ministry of Finance, Tilburg University, and the University of Miami for helpful comments; Rotman International Centre for Pension Management, University of Toronto, NETSPAR (Giannetti and Laeven), and the Jan Wallander and Tom Hedelius Foundation (Giannetti) for financial support; and Alexei Avanessov and Ying Lin for excellent research assistance. We are also grateful to Sven-Ivan Sundqvist for providing us with the data on shareholdings. The views presented in this article are those of the authors and should not be attributed to or reported as reflecting the position of the IMF, or its executive directors.