The Impact of Financial Crisis on Superannuation Funds Efficiency: Evidence from Australia

Abstract

Though superannuation funds play an important role in any economy little is known about their efficiency as the extant efficiency literature is predominantly confined to banks and insurance companies. This paper analyzes the production efficiency of retail superannuation funds in Australia over the period 2005 to 2009. We obtain estimates of production efficiency using Data Envelopment Analysis and regress it on contextual variables using Tobit model. We find that fund characteristics like size and proportion of funds invested in non-risk avenues have significant positive association while diversification and financial crisis had a significant negative association with the production efficiency of retail superannuation funds in Australia. The findings are topical as a government appointed major review of superannuation industry is tasked to examine, among others, the efficiency of superannuation funds.

Keywords: Superannuation funds, financial crisis, Australia

JEL Classification: G23, L25