Does Regulation Hurt Pension Funds' Performance? Evidence from Strongly Regulated Pension Fund Industries

Abstract

This paper presents a comparative analysis of pension funds' performance in Eastern Central Europe. In theoretical literature it is argued that investment limits and performance regulations may have a negative influence on the performance of the corresponding funds. We estimate a number of unconditional performance measures based on the CAPM for Polish and Hungarian pension funds, which face strict investment regulations. Our finding suggest that stringent regulatory frameworks may not necessarily harm the performance of the pension funds acting in these Eastern Central European countries. These results are robust for several model specifications. Estimates of the Polish and Hungarian pension fund performance are compared with those available in the existing literature for the UK and the USA pension fund industries.

Keywords: Pension fund management, investment and performance regulation, performance measurement, Eastern Central European stock markets, Emerging Markets

JEL Classification: G23, G28